Economic Integration and Planning in Maoist China 9780231881319

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Economic Integration and Planning in Maoist China

Economic Integration and Planning in Maoist China THOMAS P. LYONS

N E W YORK · COLUMBIA UNIVERSITY PRESS · 1987

Library of Congress Cataloging-in-Publication Data Lyons, Thomas P. Economic integration and planning in Maoist China. Bibliography: p. Includes index. 1. China—Economic conditions—1949. 2. China— Economic Policy—1949. I. Title. HC427.9.L96 1987 338.951 87-5414 ISBN 0-231-06542-6

Columbia University Press New York Guildford, Surrey Copyright © 1987 Columbia University Press All rights reserved Printed in the United States of America

Clothbound editions of Columbia University Press are Smythsewn and printed on permanent and durable acid-free paper. Book design by J.S. Roberts

To Ma

Contents Tables and Figures

xi

Preface

xv

Abbreviations

xvii

Introduction

3

PART ONE: ECONOMIC INTEGRATION Chapter 1. The Concept of Economic Integration A.

Definition

8. C. D. E. F.

Significance Methods of Investigation The Case of China: Data Limitations The Case of China: Environmental Factors Concluding Comments

9 9 11 14 18 23 29

Chapter 2. Agriculture

31

A. B. C. D. E. F. G.

31 40 48 55 67 71 79

Marketing Rates for Agricultural Output Grain Production Patterns Interprovincial Grain Flows Industrial Crops Vegetables and Meats Backward Specialization and Interprovincial Trade Concluding Comments

Chapter 3. Industry A.

Motor Vehicles

83 85

vili

CONTENTS Β. C. D.

Farm Machinery Tools and Equipment Steel

E.

Concluding Comments

98

108 114 127

Chapter 4. Transportation A. Transportation Output: The Statistical Evidence B. Transportation Output and Economic Fragmentation C. Transportation Networks and Equipment D. Transport Development: A Comparative Perspective E. Concluding Comments

131

Chapter 5. Interprovincial Trade and Aid

171

A. B. C.

Trade Aid Concluding Comments

132 137 148 159 168 172 176 180

PART T W O : E C O N O M I C P L A N N I N G Chapter 6. The Concept of Economic Planning A. B. C. D.

Definitions Planning Organizations and Procedures Interagent Matrices in Planning Concluding Comments

Chapter 7. Economic Planning and China's Economic System A. B. C. D. E. F. G.

The Planned and Unplanned Subeconomies Partitioning the Planned Subeconomy Plan Formulation Plan Refinement Centralization Ministry and Province in Chinese Planning Concluding Comments

Chapter 8. Planning, Policy, and Economic Fragmentation A. B. C. D. E. Conclusion

Commerce Agriculture Industry Transportation Concluding Comments

185 186 188 196 199 203 205 209

216 220 226 234 239 243 244 247 252 261 265 271

CONTENTS

ix

Appendixes A. B. C.

Area, Population, and Gross Output, by Province Classification of Activities in Chinese Accounts

283 283 295

Efficiency and Productivity: Definitions

298

Notes

307

Bibliography

347

Index

369

Tables and Figures

Tables 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. 2.10. 2.11. 2.12. 2.13.

Purchases of Grain in China, 1952-1982 Purchases of Agricultural Products in China, 1952-1982 Grain Output per Capita, by Province Dispersion of Provincial Grain Output Levels Net Grain Inflows Needed by Deficit Provinces Total Grain Outflows from Provinces, 1953-1979 Grain Inflows and Outflows, by Province, 1970s and Early 1980s Provincial Concentration of Industrial Crop Output, 1957 and 1979 Provincial Location Quotients for Area Sown to Industrial Crops, 1957 and 1979 Relationship Between Population Distribution and Output Distribution for Industrial Crops, 1957 and 1979 Yields in Yunnan, Guizhou, and Guangxi, 1957 and 1979 Sown Areas in Yunnan, Guizhou, and Guangxi, 1957 and 1979 Alternative Allocations of Cultivated Land in Yunnan, Guizhou, and Guangxi, 1979

33 36 41 43 45 49 50 58 60 63 73 75 76

TABLES AND FIGURES

xii 3.1. 3.2.

Major Motor Vehicle Plants, and Output, 1965-1975 Output of Motor Vehicles, by Province, 1979-1981

90 95

3.3. 3.4.

Tractor Plants, by Province, Late 1970s

100

Output of Tractors, by Province, 1979-1981

3.5.

Net Deliveries of Tractors, by Province, 1979 and 1980

102 104

3.6.

Net Outflows of Tractors, by Province, 1979 and 1980

3.7.

Output of Metal-Cutting Machine Tools, by Province,

3.8.

Output of Steel, by Province, 1979-1981

118

3.9.

Capacity and Output of Major Steel Complexes, 1979-1981

3.10.

Output of Major Steel Complexes, 1957-1975

120 122

4.1.

Reported Freight Volume in China, by Mode, 1949-1981

134

4.2.

Reported Freight Turnover in China, by Mode, 1949-1981

135

4.3.

Indexes of Aggregate Production and Transport Performance

138

105 112

1979-1981

in China 4.4.

Growth of Modern Freight Turnover in Large Countries

4.5.

Contribution of Transportation Sector to Net Material Product,

4.6.

Rail Freight Volume in China, by Commodity

142

4.7.

Indexes of Pipeline and Rail Freight Volume, and of Production,

143

140 141

Selected Countries

in China 4.8.

Indexes of Pipeline and Rail Freight Volume, and of Production, in the Soviet Union

146

4.9.

Indexes of Pipeline and Rail Freight Volume, and of Production, in the United States

147

4.10.

Indexes of Pipeline and Rail Freight Volume, and of Production,

147

in India 4.11.

Transportation Networks in China, 1949-1981

150

4.12.

Inventories of Locomotives, Freight Cars, and Motor Vehicles in China, 1949-1981

153

4.13.

Annual Increments to Railroad Routes in China, 1953-1982

155

4.14.

Distribution of Transport Networks by Region, 1952 and 1979

155

4.15.

Transportation Networks in Selected Countries, 1976-1979

161

4.16.

Inventories of Transportation Equipment in Selected Countries,

162

1977-1979 5.1.

Summary, Gross Values of Agricultural and Industrial Output per Capita, by Province, 1957 and 1980

173

xiii

TABLES AND FIGURES 7.1.

Shares of Total Output Allocated by Central Planners. 1978 and 1980

215

8.1. A.1. A.2.

Provinces Reporting Self-Sufficiency in Grain Total and Cultivated Area, by Region and Province, 1982 Population, by Province, 1 9 5 3 - 1 9 5 7

251 284 287

A.3. A.4.

Population, by Province, 1 9 7 8 - 1 9 8 2

289 290 292 293

A.5. A.6.

Provincial Population Growth Rates, 1 9 5 7 - 1 9 7 8 Gross Value of Agricultural Output, by Province Gross Value of Industrial Output, by Province

Figures 2.1. 2.2.

Purchased Shares of Grain Output, 1 9 5 2 - 1 9 8 2 Grain-Deficit and Grain-Surplus Provinces, 1 9 5 5 - 1 9 5 7

2.3. 3.1. 4.1.

Grain-Deficit and Grain-Surplus Provinces, 1979-1981 Output of Motor Vehicles in China, 1 9 5 5 - 1 9 8 2 Growth of Railroad Route Length in Selected Countries

5.1.

Gross Value of Agricultural and Industrial Output per Capita, by Province, 1980 Major Divisions and Subdivisions in Chinese Planning

7.1.

34 46 47 87 164 175 211

Preface FIVE YEARS AGO, I set out to investigate the validity of some first impressions concerning the pattern of economic development in socialist China. As work progressed, my sphere of inquiry broadened to include the nature of China's economic system and, in particular, those elements of Chinese planning that set China apart from other countries with Soviet-type systems. The notion of "economic integration" gradually emerged as a central theme running through most of the questions that held my interest and that seemed susceptible to systematic exploration. This book is an expanded and revised version of my doctoral dissertation, completed at Cornell during the summer of 1983. Although the book retains the structure and central theme of the earlier study, virtually none of the original text survives unchanged. Most importantly, I have made extensive use of new evidence (some newly published, some newly compiled through additional research in older sources) and have approached this evidence with a larger repertoire of methods. I have also ventured farther afield at some points, in the hope that portions of the book will be useful to readers with no special interest in the notion of economic integration. Among the many people who have assisted me at various stages of this project, I am especially grateful to George Staller and Peter McClelland for friendship and guidance; to

xvi

PREFACE

Henry Wan, Jr., for an endless stream of insightful criticisms and suggestions; and to Joseph and Mei-Hsi Chen, Leonard Campanelli, and Dorothy Staller for unfailing generosity. I thank William Baldwin, Sherman Cochran, David Easley, Walter Galenson, Nina Halpern, Mukul Majumdar, James Nickum, Dwight Perkins, Thomas Rawski, Judith Reppy, Dorothy Solinger, and Christine Wong for advice and encouragement. Patricia Carter of the interlibrary loan office at Dartmouth and Paul Cheng of the Wason Collection at Cornell provided invaluable assistance in obtaining Chinese publications. Rodney Chun and Walter Tsui, my research assistants at Dartmouth, collected much of the material used in chapter 3. Robyn Lamphere, Gail Place, and Elaine Vigneault typed several drafts of the manuscript and prepared all of the tables. Portions of the introductory and concluding chapters are adapted from a summary of my dissertation that appeared in Economic Development and Cultural Change. Chapters 4, 6 and 7 incorporate articles published in The Journal of Comparative Economics and The Journal of Developing Areas. I thank the publishers for permission to use this material.

Abbreviations ECMM

U.S. Consulate General (Hong Kong), Extracts from China Main-

land Magazines FBIS

U.S. Foreign Broadcast Information Service, People's Republic

of

China Daily Report JPRS NCNA SCMM

U.S. Joint Publications Research Service New China News Agency (Xinhua she)

SCMP

U.S. Consulate General (Hong Kong), Survey of China

U.S. Consulate General (Hong Kong), Selections from China Main-

land Magazines Press

Mainland

Economic Integration and Planning in Maoist China

INTRODUCTION

Introduction ECONOMIC DEVELOPMENT GENERALLY entails increasing interdependence and the emergence of a "circular flow" of goods and services linking, directly or indirectly, the regions within a national economy. 1 Indeed, this process of integration is often viewed as a prerequisite or cause of sustained growth. 2 The evolution of national markets and the transition from a pattern of local self-sufficiency to one of complex interdependence are therefore central themes in the histories of all advanced economies. In striking contrast to this conventional view, the "Chinese development model,"as described by Western observers, rests upon a principle of self-sufficiency ("the reduction of specialization in the division of labor"). 3 During the Maoist era (1958-1978), the central government of China promoted local selfreliance and the development of independent industrial systems; local authorities decried their dependence upon inflows from other regions and announced plans to attain local self-sufficiency in a wide variety of products. The extent to which the actual pattern of economic interaction in China is consistent with the principle of self-sufficiency remains unclear. On the one hand, some observers accept that the Chinese economy is in fact highly fragmented. This view is best represented by Audrey Donnithorne, who describes the Chinese economy as cellular ("composed of a myriad of small

4

INTRODUCTION

discrete units") and implies that China can be conceptualized as a collection of essentially autarkic local economies, rather than as a single national economy. 4 Donnithorne's fragmentation hypothesis has found wide support; a recent World Bank study, for example, takes note of the shift in China toward regional selfsufficiency. 5 Although cast largely in terms of material production and exchange, the fragmentation hypothesis also seems consistent with observations concerning broader patterns of interaction in Chinese society. For example, William Parish and Martin Whyte report "shifts in social patterns in the countryside which in some ways make villages more encysted and closed to outside contact than they were twenty years ago." 6 Chinese writers claim that industrial enterprises have become miniature societies in themselves, minimizing their contacts with the outside world. 7 On the other hand, some observers reject the fragmentation hypothesis and maintain that an integrated national economy emerged, or was in the process of emerging, during the Maoist era. Nicholas Lardy concludes that "economic growth since the decentralization [ in 1957-58] has not been characterized by a strong pattern of regional self-sufficiency." 8 According to William Snead, Donnithorne's interpretation is "very questionable" and " h e r conclusion that China was moving towards a cellular economy . . . is incorrect." 9 This position seems consistent with the recurrent Chinese injunction to coordinate all of the nation's economic activities "like pieces on a chessboard" and with the popular image of China's economy as one in which integrated national planning predominates. In other spheres, national integration has been seen in the penetration of a single governmental and party system into every region and in the establishment of a nationwide communications infrastructure. 1 0 The puzzle posed by these contradictory viewpoints must be resolved if China's development experience and its relevance to development elsewhere are to be understood. The pattern of economic interaction constitutes an essential link in explanations of recent Chinese economic history, including those that associate the Chinese model with aspects of economic performance (such as equity and productivity). Such explanations

INTRODUCTION

5

will remain highly speculative until the pattern of economic interaction itself is investigated and its relationship to both the Chinese model and the economic outcomes of interest established. More generally, a closer examination of the Chinese case may contribute to our understanding of the development process and the effects of various economic systems upon development paths. Knowledge in these areas is based upon historical samples that have frequently excluded China. Despite their importance, questions concerning the pattern of economic interaction in China remain unanswered because relevant data have been scarce and because the scope and complexity of the issues involved have hampered systematic investigation. Part 1 of this study addresses the fragmentation question by providing an appropriate conceptual framework and using this framework to interpret a substantial body of evidence, much of which has become available only within the last few years. The hypothesis maintained throughout part 1 is that China's development between 1957 and 1979 exhibited a significant tendency toward regional autarky—in other words, that economic integration was arrested or retarded. This hypothesis implies that China's actual development path diverged from that expected on the basis of theoretical considerations, the historical experiences of other large countries, and the particular constraints and opportunities associated with objective conditions in China. The body of evidence examined in part 1 indicates that the fragmentation hypothesis cannot be rejected and suggests that economic fragmentation imposed substantial costs over the course of the Maoist era. Although it is not possible to assign weights with any degree of precision, fragmentation appears to have resulted primarily from the structure and practices of China's planning organization. Other causes were certainly significant, but distinctive features of Chinese planning both aggravated any centrifugal tendencies inherent in the environment and limited the policy options available to the Communist leadership. Part 2 sketches the Chinese approach to the planning problem

6

INTRODUCTION

and explores the relationship between this approach and economic fragmentation. Throughout parts 1 and 2 , discussion is limited whenever possible to the period between 1957 (the last year of the First Five-Year Plan) and 1979 (the first year of the post-Mao "readjustment and reform")· Changes implemented during and after 1979 are mentioned only briefly in the concluding chapter; the lasting effects of post-Mao changes upon the pattern of economic interaction cannot yet be ascertained—in part because the pattern characteristic of the Maoist era itself is so poorly understood.

PART ONE ECONOMIC INTEGRATION

1 The Concept of Economic Integration AS NOTED IN the introduction, the pattern of economic activity provides an essential causal link between a "model of developm e n t " (i.e., a strategy for attaining a set of goals) and economic outcomes. The question as to whether or not the pattern of activity in Maoist China actually conformed to the Chinese model is a central concern of part 1. This chapter discusses the concept of economic integration, which is used to structure quantitative investigations in chapters 2 through 5.

A. Definition

Economic integration and its opposite, economic fragmentation, are difficult to define precisely. Economic integration involves interdependence and, more specifically, specialization among economic agents and flows of inputs and outputs among agents or groups of agents who cooperate with one another. With respect to industry, Marshall notes that increased subdivision of functions, or "differentiation," as it is called, manifests itself ..

in such forms as the division of labour, and the development of specialized skill,

knowledge, and machinery: while "integration," that is, a growing intimacy and firmness of the connections b e t w e e n the separate parts of the industrial organism, shows itself

10

ECONOMIC INTEGRATION in such forms as the increase of security of commercial credit, and of the means and habits of communication by sea and road, by railway and telegraph, by post and printingpress. Each part gets to be less and less self-sufficient, to depend for its wellbeing more and more on other parts, so that any disorder in any p a r t . . . will affect other parts also. 1

Generalizing from Marshall's comments, an entire economy can be conceptualized as a set of agents (producers and consumers, " t h e separate parts of the [economic] organism"), each of whose activities may require certain inputs and yield certain outputs. A given pattern of activity within the economy therefore entails a corresponding pattern of input-output flows to and from these various agents. The volume and nature of these flows reflect the extent of "economic integration" among agents—that is, the extent to which agents depend upon others for supplies of their inputs and markets for their outputs. Of course, in a national economy, flows among distinct agents typically cannot be studied individually; however, the agents can be grouped into larger economic units and input-output flows can be defined in terms of these composite units. 2 For example, producers can be classified according to the types of outputs they produce and grouped into "industries," or producers and consumers can be classified according to their locations and grouped into "regions." Studies in interindustry and interregional economics are largely concerned with economic integration among such composite units. 3 Associating the concept of economic integration with patterns of input-output flows accords closely with common usage in the fields of economic history and development. 4 Few observers would describe an economy as integrated if its constituent units did not trade with one another. On the other hand, actual input-output flows may fail to capture some significant modes of economic interaction; these modes are not systematically investigated in subsequent chapters. Economic integration pertains to the pattern of economic activity, not to the economic system with which a certain pattern is associated. 5 In particular, economic integration must be carefully distinguished from "centralization," which pertains

THE CONCEPT OF ECONOMIC INTEGRATION

11

to the allocation of decision-making authority or of command over information—not to the pattern of economic activity itself. In general, there is no necessary relationship between centralization and integration; a market economy is highly decentralized, but this decentralization does not imply that a market economy is not integrated. Economic integration must also be distinguished from various forms of organizational integration. China, for example, has experimented with industrial corporations and joint enterprises, each of which brings several producers under a common management. 6 Such arrangements may or may not promote specialization and cooperation among the producers within corporations (and among the corporations themselves). Finally, economic integration does not necessarily entail political and cultural conformity, or unity of purpose; for example, "regionalism" is not necessarily an indication of economic fragmentation among the various regions in question.

B. Significance Economic integration has been a central theme in explanations of economic development since at least the time of Adam Smith, whose interpretation of the growth process rested upon a perception of increasing interdependence (the progressive division of labor) and its causal role in the wealth of nations. The study of various forms of cooperation and their importance for the efficient allocation of scarce resources constituted a substantial portion of classical economics. More recent analyses have further elaborated the potential single-period benefits from integration and explored its intertemporal effects upon the accumulation of physical capital, acquisition of skills, and diffusion of technology. 7 The most familiar explanations linking integration with output and productivity are those concerning the direct gains from commodity trade—gains available given a fixed production possibilities frontier for each unit in the economy. Due to differ-

12

ECONOMIC INTEGRATION

enees among units in production technologies, preferences, or factor endowments (natural and acquired), relative costs almost certainly differ at the allocations chosen by the various units in autarky. Such cost differences imply that specialization and interunit trade will permit greater total output of at least one commodity, even though each unit, considered individually, produces efficiently in autarky; each unit can be made better off if the units cooperate, in accordance with their comparative advantages. 8 From an initial state with trade, unexploited gains may still exist, in which case a similar conclusion follows. During any single period, then, a tendency toward self-sufficiency may cause the set of economic units to produce an output bundle strictly within their collective production possibilities frontier, with each unit acquiring a bundle dominated by others that would be available to it through greater cooperation. The principle of comparative advantage rests upon differences in relative costs and, ultimately, upon differences among economic units themselves. Even if constituent economic units are identical, however, trade may still permit greater output for the economy as a whole and gains for each unit. This possibility arises when economies of large-scale production exist. 9 A composite unit may exhibit scale economies even if its individual producers do not; in other words, the economies may be external to individual producers. 10 The potential output gains associated with either differences among economic units or scale economies do not involve changes in the factor endowment of any unit. Admitting reallocation of some factors (without increasing the total endowment) almost certainly enlarges the collective production possibilities frontier. The different points on the frontier may then involve different allocations of the mobile factors among constituent units. In general, even with such factor mobility, trade in products permits each unit in the economy to acquire a bundle dominating the one it would produce in the absence of trade. Sustained growth of output entails not only exploitation of the production possibilities existing at any time but also creation and exploitation of new possibilities over time. Production possibilities frontiers in future periods depend upon the extent to

T H E C O N C E P T OF E C O N O M I C I N T E G R A T I O N

13

which current possibilities are exploited. Most importantly, the increased output available through exploitation of comparative advantages or scale economies in any single period permits increased investment (for a given level of consumption). Furthermore, increases in current output may enhance future possibilities even without increased investment if, for example, acquisition of skills in certain productive activities is directly associated with the output levels attained in those activities." Technological change plays a central role in sustained growth—and propagation of technological change occurs partly through the embodiment of innovations in products and, especially, in capital goods. Fragmentation that inhibits flows of such items slows diffusion of existing technological knowledge. Slowing diffusion slows the pace of further technological advances, because inventive activity is diverted from production of new knowledge to replication of existing knowledge and because further advances may require the use of existing knowledge. 12 Finally, economic integration may have favorable motivational effects. John Stuart Mill noted that as a result of commodity flows among economic units, people "in a quiescent, indolent, uncultivated state, with all of their tastes either fully satisfied or entirely undeveloped" may be induced " b y the easier acquisition of things which they had not previously thought attainable . . . to work harder for the gratification of their new tastes, and even to save, and accumulate capital." 1 3 And competitive pressures from other units may force cost reductions that insulated producers would not otherwise feel compelled to make. 14 More generally, economic integration seems to be related to the " t e n s i o n s " or " p r e s s u r e s " through which change in one unit of an economy induces investments and other responses elsewhere in the economy. 1 5 As a result of these tensions, every important advance in the organisation of production . . . alters the conditions of industrial activity and initiates responses elsewhere in the industrial structure which in turn have a further unsettling effect. Thus change becomes progressive and propagates itself in a cumulative way. 16

It is likely that the extent of economic integration affects the relationship between an initial stimulus and subsequent re-

ECONOMIC INTEGRATION

14

sponses: for a given stimulus, the more integrated the economy, the higher the probability of ensuing progressive change. Integration economizes on decision-making ability, " t h e scarce resource which conditions all the other scarcities and difficulties in underdeveloped countries." 1 7 This brief survey o f theoretical considerations strongly suggests that a tendency toward self-sufficiency among the constituent units o f an economy can impose substantial costs, slowing productivity improvements and output growth for the economy as a whole. In general, o f course, integration cannot be said to " c a u s e " development, and a greater degree of integration does not prove attainment of a superior allocation. An inappropriate pattern o f specialization and exchange may entail losses rather than gains, and integration may have undesirable consequences that offset or outweigh any realized benefits. Although theoretical speculation alone cannot establish that economic integration is closely related to development, the linkages suggested by theory seem to have been relevant in fact. Historical investigations identify economic integration as an important element in the development experiences of the United States and other countries and suggest that the importance of integration in sustained development is nearly universal. 18 In each historical case, the relationship between integration and development is complex and circular. 19 Indeed, integration is perhaps best viewed not as a cause (or result) of development, but simply as one aspect o f development itself.

C. Methods of Investigation The belief that economic integration typically plays an important role in development has motivated a number of investigations intended to broadly characterize patterns of input-output flows or changes in such patterns over time. In the case of the United States, for example, Louis Schmidt's well-known work is an attempt to "synthesize the several streams of commerce and to

THE CONCEPT OF ECONOMIC INTEGRATION

15

interpret the meaning of the whole pattern." 2 0 In the case of China, Audrey Donnithorne's fragmentation hypothesis implies a similar synthesis and interpretation. Any attempt to synthesize and interpret the pattern of input-output flows encounters a fundamental problem. Ideally, a systematic study of input-output flows would entail construction and analysis of matrices completely describing all such flows during the period or periods in question. Even if these matrices were available, no single indicator derived from data in the matrices would capture the extent of integration among economic units or changes in the extent of integration over time. For example, defining economic units along regional lines and assigning price weights to individual inputs and outputs, consider the total value of interregional trade as a potential indicator. In an economy with only two regions, suppose that from one period to the next the value of trade increases but its physical volume decreases (due to a shift from necessities to high-value luxuries). Suppose that the value of trade between the two regions increases but fails to keep pace with the value of their total output—or that the value of trade increases as a result of specialization contrary to comparative advantage (which causes total output to decrease). In each of these examples involving two regions and two periods, it is not clear that changes in the value of trade indicate even the direction of change in the extent of integration. An economy with many regions presents additional problems. Suppose that interregional trade grows more rapidly than total output but that some individual regions move toward autarky. Has the economy become more integrated? Problems arise in these examples not because the value of trade is a particularly poor indicator, but because the concept of economic integration cannot be reduced to any single dimension. Fortunately, the proposition that a pattern of economic interaction or changes between two patterns can be meaningfully characterized does not presume that integration is readily quantifiable. To characterize a pattern as one of, for example, regional self-sufficiency, it must be true only that most observers synthesizing the same evidence reach similar overall conclusions.

16

ECONOMIC INTEGRATION

Because any synthesis involves some implicit assignment of weights to individual input-output flows, a meaningful characterization cannot be highly sensitive to differences across observers in the assignment of such weights. 21 Of course, the weighting problem inherent in any attempt to study economic integration can be ameliorated by restricting the field of inquiry to certain input-output flows—that is, by investigating integration among a subset of the units in an economy or by investigating the "integration of m a r k e t s " for particular inputs or outputs. Restricting the field of inquiry, however, precludes broad characterizations of the sort sought by Schmidt or Donnithorne. Any attempt to study actual patterns of input-output flows also encounters data problems, because complete matrices precisely describing these flows do not exist and cannot be constructed. Of course, restricting the field of inquiry may permit description of all relevant flows within narrow margins of error. But studies that seek broad characterizations will typically lack descriptions for some flows and will encounter descriptions with wide margins of error for many others. 22 In the absence of complete input-output matrices, reaching a synthesis may be viewed as a process of elimination. Defining economic units along regional lines, consider an attempt to broadly characterize an economy's true development path. Any development path involves a transition from some initial pattern of interregional flows to some terminal pattern of flows; neither pattern of the pair is known. Each bit of data concerning one of the patterns eliminates some conceivable pairs of patterns, since the true pair cannot be among those inconsistent with the data. As data are accumulated, at some point it may be true that all of the pairs not yet eliminated can be characterized in the same way. For example, with a given accumulation of data it may be possible to say that each of the remaining pairs reflects a development path with strong tendencies toward regional selfsufficiency. The process of elimination through which the true development path is characterized does not require that each bit of data precisely describe some input-output flow (or flows). In

THE CONCEPT OF ECONOMIC INTEGRATION

17

particular, data pertaining only to changes between the initial and terminal periods, rather than to either period individually, can be used to eliminate conceivable pairs of patterns. The body of accumulated data may therefore imply an incomplete input-output matrix for the initial period, an incomplete matrix for the terminal period, and an incomplete matrix of changes between periods. 23 In a specific historical case, several types of surviving data are likely to provide entries in one or another of these three incomplete matrices. 24 The magnitudes of some individual flows, or aggregates derived from such magnitudes, may be available in direct reports concerning internal commerce. Reports pertaining to transport performance may yield additional direct evidence, since input-output flows necessarily entail transportation. Finally, for many commodities the actual magnitudes of flows among units can be deduced from data concerning production and consumption. In the case of staple foods, for example, a constant or rising regional population and regional per capita output below the subsistence level clearly imply food inflows, the magnitudes of which can sometimes be calculated. In addition to direct quantitative evidence concerning input-output flows, many supplementary indicators can typically be brought to bear upon the integration question. These indicators fall into three categories. The first category includes evidence reflecting an economy's capacity to effect input-output flows among constituent units. Indicators pertaining to transportation capacity fall into this category, because transportation capacity constrains the pattern of interunit flows and hence rules out some patterns that are otherwise conceivable. 25 The second category includes evidence concerning prices, budgetary transfers, planning directives, and other "mechanisms of interdependence." 26 These sorts of evidence are indirect and imprecise; they require inferences from the workings of a particular economic system to the pattern of economic interaction, but such inferences frequently cannot be drawn with any degree of certainty. The most widely used indicator in the second category is the convergence of relative prices across economic units (in market economies). 27

18

ECONOMIC INTEGRATION

The third category includes evidence concerning the evolution of conventions, laws, and institutions in particular economies. For example, the growth of financial intermediaries is related to transactions among agents and perhaps to economic integration among the units to which the agents belong.28 While relying primarily upon data that directly reflect input-output flows minimizes the potential for faulty inferences and misinterpretations, use of supplementary indicators may well permit closer identification of the true development path. Suppose that, in a particular historical case, available evidence does permit close identification of the true path. Understanding this path generally requires speculation about paths that might have occurred instead. If the extent of integration among regions actually changed much less than seems probable, the true path might be said to exhibit a tendency toward regional self-sufficiency—even though the extent of integration actually increased. Similarly, if the economy does not perform as well as expected, the true path might be described as undesirable—even though the actual terminal state of the economy is preferred to the initial state. Speculation about unobserved alternative paths is not always explicit, but any causal significance assigned to economic fragmentation (or integration) ultimately rests upon speculative comparisons. 29

D. The Case of China: Data Limitations Specification of economic units. In order to address the fragmentation question systematically, it is first necessary to specify a set of economic units among which the input-output flows of interest occur. Most discussions of economic fragmentation in China have dealt with economic units defined along regional lines, although the precise definitions of the economic units involved have not always been made explicit. Delineation of regions according to some economic criteria might be most appropriate; however, delineation along established administrative bounda-

THE CONCEPT OF ECONOMIC INTEGRATION

19

ries is most consistent with the sorts of data commonly available. In subsequent chapters, each region is a set of producers and consumers physically located within a province or group of contiguous provinces. 30 Each such region includes some agents directly subordinate to central, rather than regional authorities; this distinction between central and noncentral control is important in interpreting some types of Chinese data and in explaining China's development path over the course of the Maoist era. At some points in subsequent chapters, finer partitions into localities defined along county or commune boundaries are briefly considered. Data pertaining to these subprovincial regions are fragmentary and typically do not support general conclusions. Other partitions, with economic units delineated along sectoral lines or in terms of ownership are also considered. Although alternative partitions are mentioned occasionally, the extent of economic integration among regions delineated along provincial boundaries is of central concern. Specification of initial and terminal periods. Systematic investigation of changes in the extent of integration among regions requires specification of initial and terminal periods. As was true in delineating regions, data availability is again an important consideration. Relevant provincial data are most plentiful and reliable for the mid-1950s and for the years since 1978. Wherever possible, subsequent chapters therefore investigate changes between 1957 and 1979 or, when longer periods are more appropriate, between 1955-57 and 1978-81. The use of initial and terminal periods of several years is preferred when dealing with flows of products that may exhibit substantial year-to-year fluctuations in output or with flows of durable goods that may be acquired (by individual agents) only infrequently. 31 Data limitations and problems of interpretation. In some cases data pertaining to years between 1957 and 1978 are available. These data, however, are frequently subject to substantially wider margins of error than are those pertaining to the mid-1950s and to years since 1978. At the national level, recent data con-

20

ECONOMIC INTEGRATION

cerning grain output reflect this problem. For some years between 1957 and 1978, the Statistical Yearbook of China gives grain output (in tons) with only two significant digits rather than the customary five.32 For some crops, the yearbook gives no output figures pertaining to the years of the Great Leap and Cultural Revolution, and recent reports indicate that some published aggregate data for these two periods are greatly inflated or are based upon very incomplete and inaccurate local reports. 33 The two periods for which relatively good data are available bracket the Maoist era, the era of greatest interest in studies of economic integration among regions of China. 34 Relying upon data for the mid-1950s and for years since 1978 to study the Maoist era does introduce some potential problems of interpretation. Most importantly, it is necessary to assume that changes in the pattern of interaction over the course of the Maoist era dominate any earlier or later changes captured in the data for 1955-57 and 1978-81. Given the length of the Maoist era and the fact that the years immediately preceding and following it were not highly atypical, this assumption is not unreasonable. 35 Furthermore, in some cases the assumption can be supported by appeal to fragmentary data for intervening years; in other cases, the biases introduced by changes that occurred before or after the Maoist era are clearly in acceptable directions, in that they cause understatement of any fragmentation that took place during the Maoist era itself. A second problem in the choice of initial and terminal periods is associated with the evolution of China's economic institutions and especially with significant changes between 1955 and 1958 and between 1978 and 1981. The commune system, for example, was introduced in 1958, and the rural responsibility system was widely adopted after 1978. In some cases reported data may be sensitive to institutional arrangements. To the extent that this is true, institutional changes introduce biases in intertemporal comparisons, and the directions and probable magnitudes of these biases must be considered when interpreting the data affected. Chinese pricing and accounting practices and the structure of the Chinese statistical system underlie certain fundamen-

THE CONCEPT OF ECONOMIC INTEGRATION

21

tal problems in the interpretation of economic data. First, many Chinese prices are set arbitrarily by governmental authorities and bear no relation to values (regardless of the theory of value to which one subscribes). 36 Second, some published data are based upon methods of aggregation that admit double-counting to an extent that is both significant and variable (across sectors or over time). 37 The gross values of industrial output and of agricultural output, two widely cited indicators of economic performance, are subject to both the pricing and double-counting deficiencies. Third, systematic biases may occur in official reports and may be difficult to detect. Biases are anticipated by some observers of the Chinese economy, in view of what one has called " a basic rule of Communist economics": lower-level authorities almost always report the fulfillment of targets, no matter how the work is done (if at all). 38 Falsifications are hardly surprising, since reports from lower levels are used to evaluate the performance of individuals who exercise some control over the contents of such reports. 39 Biases may be difficult to detect because they do not necessarily generate obvious inconsistencies in published reports and because alternative sources of information are frequently unavailable. Finally, inaccuracies occur even without conscious falsification, due simply to incompetence and understaffing, both of which are especially likely in a large, poor country. Even when data are available and are thought to be reasonably reliable, their evidential value may be reduced if they cannot be precisely identified as to definition and coverage or if they are not comparable to corresponding data for other countries. In the case of China, the first of these two problems occurs as a result of unannounced changes in statistical reporting conventions or confusion between functional and administrative accounts. 40 The second problem plagues attempts to interpret data drawn from China's national income accounts, which are not comparable to those of nonsocialist countries. As in any other historical case, a variety of indirect indicators can be used to supplement the direct quantitative evidence available in the case of China. Because many Chinese

22

ECONOMIC INTEGRATION

prices are set by governmental authorities, however, it is not often possible to supplement direct evidence with indicators based upon price movements. Nor do the planning directives that substitute for price movements provide an alternative body o f evidence, since planning directives are not generally made public. On the other hand, in the Chinese case much useful evidence concerning the development of transportation capacity is readily available, and the Chinese media frequently report persistent problems that seem closely associated with the extent o f regional specialization and the nature and volume of interregional flows. T h e s e problems include, for example, the proliferation o f nonstandardized manufactured goods associated with dispersed production for insulated local markets. 4 1 Finally, Chinese writers offer claims concerning the pattern of internal trade and discussions concerning relevant aspects of institutional history. Assessing the validity o f these claims and discussions and ascertaining the years to which they pertain are sometimes difficult. T h e general considerations in Section I.C strongly suggest that any investigation o f economic integration should rely heavily upon direct quantitative evidence. In the case of China, significant problems arise in the use of such evidence; however, it has not been seriously argued that such problems are so severe as to undermine all attempts to investigate recent Chinese economic history. It is certainly necessary to rely primarily upon those types o f data that pertain to clearly defined categories and that are most likely to be reasonably accurate. Data pertaining to specific input-output flows and given in physical units are preferred to aggregate data involving double-counting and arbitrary weights. Data for 1955-57 and 1978-81 are preferred to those for intervening years and to those for years further removed from the Maoist era. Some use can also be made o f " a n e c d o t a l " evidence and o f indirect supplementary indicators, but these should be weighted less heavily than are bodies of systematic quantitative evidence.

THE CONCEPT OF ECONOMIC INTEGRATION

23

E. The Case of China: Environmental Factors Before investigating the fragmentation issue, it will be helpful to consider briefly some distinctive features of the Chinese economic environment, the opportunities and constraints associated with these features, and their implications for China's development experience. The Chinese "economic environment" includes the inherited state of the Chinese economy as of 1955-57 and subsequent circumstances and events beyond the control of Chinese decision makers. 42 Environmental factors may be conveniently classified as aspects of natural endowment and population, level of economic development, historical legacy, and international setting. Size and diversity are among the most important aspects of China's natural endowment. 43 In terms of land area, China is the world's third largest country, extending more than 5,000 kilometers from east to west and more than 5,500 kilometers from north to south. Wide regional variations in industrial and agricultural potential occur within this vast territory. About 85 percent of China's coal reserves, for example, are located in the northern half of the country, with 60 percent in Shanxi alone. Although smaller deposits of coal are widely scattered, some southern provinces are seriously deficient. Iron, like coal, is more plentiful in the northern half of China, with one quarter of the country's reserves located in Liaoning. On the other hand, deposits of lead, zinc, manganese, copper, tungsten, and tin are concentrated south of the Yangzi River. Those dimensions of the natural environment most relevant to agriculture—soil type, terrain, water resources, and climate—also differ markedly from north to south and from east to west. Whereas much of the north experiences an average frost-free period of less than 200 days and an average annual rainfall of less than 50 centimeters, areas of the south are frost-free year-round and receive more than 200 centimeters. Whereas the eastern half of China includes wellwatered lowlands and hills, the west is predominantly a section of rugged uplands and arid or semiarid basins.

24

ECONOMIC INTEGRATION

The more hospitable plateaus and lowland areas of China are naturally compartmentalized by mountains, which in some cases cause sharp contrasts in environmental patterns between adjacent core areas. Natural barriers impede communications among core areas, except along inland waterways, which generally flow west to east, and along the coast to the east and southeast. 44 While China's natural resource base is notable for its diversity, China's population is surprisingly homogeneous for a large and geographically segmented country. The Han people make up 94 percent of the population and share a common script (but not yet a common spoken language). More importantly, the size of China's population places extreme pressure upon the country's resource base and especially upon arable land. This population pressure underlies a persistent food problem and a tradition of heavy concentration upon production of staple foods. Population pressure also suggests that efficient allocation of scarce resources is a matter of greater urgency in China than in nations able to feed themselves more easily. The food problem is but one aspect of China's low level of economic development. Before the accession of the Communist regime, China had experienced very limited modernization— and no sustained growth at rates comparable to those observed historically in the economies that are now most developed. Although the early 1950s saw significant structural changes and rapid growth, as of 1955-57 the Chinese economy still yielded a GNP per capita barely above subsistence level. Roughly fivesixths of the labor force were still directly engaged in agriculture and handicrafts. Impressive development had occurred in some branches of modern industry and in some regions, but for most industrial products national output per capita was minuscule. Steel output, for example, amounted to only seven kilograms per capita in 1956, comparable to per capita output in the United States shortly after the Civil War. Production of modern inputs for agriculture was just beginning; China would not produce even a million tons of chemical fertilizer per year until the mid-1960s.45 Several aspects of China's economic backwardness are

THE CONCEPT OF ECONOMIC INTEGRATION

25

relevant when interregional flows are of central concern. First, during the mid-1950s traditional forms of transportation were still of primary importance. Although precise data are not available, the importance of traditional transport can be inferred from the small size of China's rail and highway networks and inventories of modern transport equipment. In the case of highway transport, for example, China had less than 100,000 kilometers of allweather roads and fewer than 100,000 motor vehicles. 46 Second, with an agrarian economy, with core areas naturally compartmentalized and with a predominantly premodern transport system, the pattern of economic activity undoubtedly exhibited a high degree of local self-sufficiency in most parts of the country. Third, most nonagricultural enterprises were small and primitive, protected by high transportation costs and segmented markets. Finally, modern technological knowledge and managerial talent were scarce and unevenly distributed, because modern methods of production had not yet spread widely from coastal enclaves. The broad historical path by which the state of the economy (as of 1955-57) had been attained is also a part of the economic environment. Key aspects of China's recent history include an unfortunate and prolonged series of encounters with industrialized countries and a wrenching process of dynastic decline and political disunity extending from the mid-1800s through the 1940s. Contact with the modern world stimulated the development of modern industry and transportation and accelerated the growth of cities in China toward the end of the nineteenth century. Industrial products, produced in coastal cities or imported, were distributed over widening markets, and raw materials were collected from widening hinterlands. Interregional flows of agricultural products increased, as distinct rural marketing areas were linked by new forms of transportation and as growing urban areas became dependent upon more distant food suppliers. New commercial and financial institutions developed, reducing transactions costs and facilitating mobilization of resources. 47 Although changes typically associated with the introduction of modern industry and transport were clearly under way

26

ECONOMIC INTEGRATION

in the decades preceding accession o f the Communist regime, the traditional pattern o f economic activity remained essentially unchanged over much o f the country. Indeed, even as modern transport and industry fostered integration within and among regions, the incursions o f foreign powers in the northeastern and coastal provinces and the division o f remaining areas among rival Chinese regimes raised artificial internal barriers, impeded exploitation o f economic opportunities, and forestalled the emergence of integrated markets. Foreign aggression and internal disunity finally erupted into the wars of the late 1930s and the 1940s, severing the new interregional links formed where integrative forces had prevailed. 4 8 The events o f the pre-Communist era affected not only the state o f the Chinese economy itself, but also Chinese attitudes toward modernization and toward such issues as national defense and industrial location. In particular, the legacies of imperialism and war—as well as political and economic choices made by the new regime—were important factors shaping Communist China's international relations. During the Maoist era, the country would face limited opportunities for acquisition of technological knowledge and economic assistance and for international trade. And the Korean War, continued hostilities in the Strait o f Taiwan, and the termination of Russian aid would leave China at odds with both the capitalist and Soviet blocs. Finally, the accession and survival of the Communist regime itself can be viewed as one element of the Chinese economic environment. On the one hand, Communist rule precluded some development paths that were otherwise feasible—paths that became unavailable as a result o f fundamental choices concerning political and economic organization. 4 9 On the other hand, expropriation and extensive use o f administrative command created possibilities that would not have been available under most regimes. The key features of the Chinese economic environment might well lead one to expect rapidly increasing interprovincial flows over the course o f the Maoist era. In other words, given

THE CONCEPT OF ECONOMIC INTEGRATION

27

the Chinese environment, the most probable development paths would not exhibit significant fragmentation at the provincial level. Both theoretical considerations and the experiences o f other large countries indicate that accumulation of modern transport capacity and the reduction o f transport costs are important stimuli in the development process. Given China's size, endowment o f natural barriers and natural arteries, and level of development, one might expect rapid accumulation of transport capacity in the early decades o f Communist rule. The externalities associated with investment in infrastructure and the commitment o f the new regime to rapid and sustained growth would seem to reinforce this expectation. China's size and the fact that most provinces are interior suggest a relatively greater role for internal trade (as opposed to international trade) in China's economic development. This expectation is reinforced by the generally hostile international environment faced by the Chinese, especially after the rift between China and the Soviet Union, and by the historical experiences o f other large countries. China's low level of development and perhaps locational distortions caused by foreign intervention in the prewar era both imply a subsequent spread of industry from coastal enclaves and the emergence and growth of new industrial bases in other areas. 5 0 But the great diversity across regions in natural endowment and in past accumulation o f human and physical capital suggests that the spread o f modern transport and industry would have significantly different effects upon patterns o f economic activity in the various regions. Substantial differences in relative costs, associated with soils, water resources, and climate, imply increasing regional specialization within agriculture and interregional trade in agricultural products. One would expect some regions to shift from production of food crops into production o f commercial crops such as cotton and tobacco, or from crop farming into activities such as livestock raising. At the same time, other regions would shift more completely into production o f staple foodgrains, generating larger surpluses for export to deficit areas. Similarly, substantial differences among regional endowments

28

ECONOMIC INTEGRATION

and technologies imply regional specialization within industry and interregional trade in industrial products. Regions well-endowed with coal and iron ore might specialize in steel and in energy-intensive downstream industries, while densely-populated regions deficient in energy resources might specialize in labor-intensive light industries. Finally, one might expect provinces to become increasingly specialized at the sectoral level, with those poorly endowed for agriculture shifting more rapidly and completely into nonagricultural activities and depending more heavily upon interregional flows for their supplies o f agricultural products. The spread o f modern transport and industry and the fragmented initial state o f the national market have further implications related to the size and siting of industrial facilities. At per capita income levels near subsistence, even an entire province may not provide a market large enough for one plant o f efficient scale in, for example, the steel industry. One would therefore expect geographical concentration in such industries, with a few locales producing nearly the entire national output and with a large share o f total output flowing among regions. Even when economies o f scale are not so significant for individual plants, one might expect industrial capacity to concentrate in a fairly small number of compact areas, realizing external economies (or economies o f agglomeration) not available to scattered installations. Each industrial base would absorb some local market areas into a regional economy, generating surpluses o f certain products for export to other regional economies and to local market areas not yet tributary to any particular industrial base. Some established plants serving local markets, previously protected by high transfer costs, would be displaced by new producers in distant industrial bases—producers exploiting internal economies o f scale, or economies of agglomeration, or advantageous resource endowments. The turmoil preceding accession of the Communist regime strengthens expectations based upon natural and technological factors. Disunity, foreign aggression, and war slowed and ultimately disrupted the process of regional integration associated with introduction of modern transport and industry. After reunification, one might expect to observe a long period o f catch-

THE CONCEPT OF ECONOMIC INTEGRATION

29

ing up, with relatively rapid growth of interregional flows accompanying exploitation of economic possibilities made technically feasible in earlier years but foreclosed by artificial barriers and by war. A brief consideration of the Chinese economic environment does not support a presumption that China's development path should exhibit a strong tendency toward fragmentation along regional lines. On the contrary, distinctive features of the Chinese environment point to integration among regions as an expected characteristic of development in China during the Maoist era. Of course, given the state of the economy in the initial period, this expectation does not imply that the Chinese economy would become highly integrated over the course of the Maoist era (an era of less than a quarter century). It does indicate that fragmentation, if in fact it has characterized China's development path, constitutes an interesting aberration and perhaps a unique historical example.

F. Concluding Comments The remainder of part 1 proceeds from the general methodological and historical observations of this chapter through a systematic investigation of evidence bearing upon economic integration in socialist China. Chapters 2, 3, and 4 discuss agriculture, industry, and transportation; chapter 5 then integrates and extends the sector-specific discussions. Chapters 2 through 4 are differentiated not only by subject matter but also by technique. Chapter 2 examines the data concerning agriculture using simple statistical indicators borrowed mainly from the field of economic geography. Chapter 3 uses brief historical studies of individual industries. Chapters 2 and 3 both incorporate international comparisons; in chapter 4, however, such comparisons constitute the centerpiece of the entire analysis. The three chapters collectively, therefore, cast a wide net, both in terms of the data examined and in terms of the techniques employed.

2 Agriculture CONSIDERATION OF ECONOMIC interaction in China logically proceeds from an examination of trade in agricultural products. Diversion of labor and other resources to nonagricultural activities requires provision of essential consumer goods (and, in many cases, of materials) that are themselves products of agriculture. In the case of China, rapid growth of industry, great geographical diversity, and large interregional differences in population densities (with respect to agricultural potential) all suggest rapid growth of interregional trade. This chapter investigates the evolution of trade flows for a number of agricultural products.

A. Marketing Rates For Agricultural Output Flows of agricultural products originate in individual production units as each makes available to others, through exchange, a portion of its current output or accumulated stocks. Chinese analysts frequently observe that "commodity production" (i.e.,production for exchange) remains undeveloped in the Chinese countryside. 1 The statistical evidence in tables 2.1 and 2.2 supports this claim and suggests that "commodity production," as a share of total output, did not increase significantly

32

ECONOMIC INTEGRATION

between the mid-1950s and the late 1970s. The evidence in the tables also provides an opportunity to examine time paths over the entire Maoist era. Table 2.1 presents data concerning purchases of grain from the agricultural sector. Although the coverage of the series in columns 2 and 4 of the table is not entirely clear, an examination of these data indicates that they pertain to procurement by the state, including taxes in kind and purchases at negotiated prices. 2 Comparison with data from earlier sources reveals significant revision of the figures for the 1950s, probably to produce a series that is both internally consistent and comparable to the current series for grain output. 3 The figures in column 6 of the table include gross purchases by state commercial departments, by industrial and other departments, and by the nonagricultural population. In columns 3, 5, and 7 of table 2.1, grain purchases are expressed as shares of total output. The shares derived from total purchases (in column 7) are approximations, subject to errors arising from changes over time in the ratio of trade weight to unhusked weight and from the discrepancy between calendar year and production year. Comparison of columns 7 and 3, however, does suggest that the two gross purchase series are broadly consistent. The narrow difference between total purchases and gross purchases by government (shown in figure 2.1) reflects the virtual monopoly of state commercial departments in the grain trade during most of the period since the mid 1950s—and the reemergence of private sales to the nonagricultural population since 1978.4 The data in table 2.1 indicate that the amount of grain procured by the government (in both gross and net terms) increased by only one-third between 1953-57 and 1976-80. Since grain output increased by over two-thirds, the shares of output procured by the government declined, from 26.8 percent to 21.1 percent gross and from 18.3 percent to 14.5 percent net. On a per capita basis, grain procurement (gross and net) decreased by about 15 percent, although output increased significantly. Total purchase data, in columns 6and 7, reveal an even smaller increase

T a b l e 2 . 1 Purchases of Grain in China, 1952-1982 Government Purchases'

Year Gross

11) 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 average 1953-57 average 1976-80

Total Purchases? Nef

(million tons. unhuskedl (2) 33.3 47.5 51.8 50.7 45.4 48.0 568 67.4 51.1 40.5 38.1 44.0 47.4 48.7 51.6 49.4 48.7 46.7 54.4 53.0 48.3 56.1 58.1 60.9 58.3 566 61.7 72.0 73.0 78.5 88.1

1share of output, percent) (3) 20.3 28.4 30.6 27.6 23.6 246 29' 40e 35.6 27.4 24® 26e 25.3 25.0 24.1 227 23.3 22.1 227 21.2 201 21 2 21.1 21.4 20.3 20.0 20.3 21.7 22 8 24.2 249

{million tons, unhusked) 14) 282 359 31.6 36.2 287 339 41 7 47.6 30.9 25.8 25.7 28.9 31.8 33.6 38.2 37.7 379 33.8 42.0 39.8 33.9 41.0 44.0 43.9 40.7 37.6 42.7 51.7 48.0 488 550

(share of output, percent) (5) 17.2 21.5 186 19.7 14.9 17.4 21e 28e 21.5 17.5 16" 17e 17.0 173 17.9 17.3 18.1 16.0 175 159 14.1 15.5 16.0 15.4 14.2 13.3 14.0 15.6 15.0 15.0 15.6

(million tons. trade) (6) 39.0 43.1 50.9 475 40.2 460 51 8 64.1 46.5 366 32.4 37.0 40.1 39.2 41 4 41.4 404 38.5 46.5 43.8 38.5 48.4 469 52.6 49.1 47 7 507 60.1 61.3 68.5 78.1

(share of output, percentf m 28.7 31.1 36.2 31 1 25.1 28.4 31e 45' 39.1 29.9 24' 26' 25.8 24.3 23.3 22.9 23.3 22.0 233 21 1 19.3 22.0 205 22.3 20.7 20.3 20.1 21.8 23.0 25.4 26.6

487

26.8

33.2

18.3

45.5

30.2

64.3

21.1

44.1

14.5

53.8

21.2

SOURCE: SSB, Statistical Yearbook 1983, pp. 389 and 393. 'Purchase data and shares pertain to production years (April 1 of indicated year through March 31 of following year); purchase data apparently include taxes in kind and purchases at quota, over-quota, and negotiated prices. "Purchase data pertain to calendar years, data include purchases by state commercial departments, by industrial enterprises and other organizations, and by nonagricultural papulation. 'Gross purchases less resales by the state to the agricultural population. ^Approximate; output data pertain to production years Output converted to trade basis using conversion factor of 0.83. Output data are rough estimates, as given in the Chinese source.

34 per

ECONOMIC INTEGRATION cent

Figure 2.1 Purchased Share of Grain Output. 1952-1982 NOTE: Because the total purchase figures are approximations, the total purchased share is shown as a band within which the true share probably lies. All shares pertain to production years (April 1 - March 31). For definitions, see table 2.1 SOURCE: Table 2.1 (columns 3, 5, and 7); and SSB, Statistical Yearbook 1983. pp. 103 and 393.

in absolute terms between 1953-57 and 1976-80 and therefore larger decreases in the purchased share and in per capita purchases. 5 The differences between gross procurement (column 2) and net procurement (column 4) in table 2.1 are the quantities of

AGRICULTURE

35

government grain resold to the agricultural population. 6 Such resales permit specialization in nongrain crops and relief for poverty-stricken areas. The data in table 2.1 indicate that resales to the agricultural population typically ranged from 14 to 17 million tons annually from 1955 through 1965. Resales fell off during 1966-71, recovered during 1972-75, and increased rapidly thereafter. Comparing 1976-80 with 1953-57 reveals a 30 percent increase in the amount of grain procured by the government and resold to the agricultural population; however, the share of grain output procured and resold fell from 8.5 percent to 6.6 percent. Of course, the shares of grain output procured by government during the 1950s do exhibit variation across provinces. Three-fourths of the provincial (gross) shares, however, fell between 10 and 21 percent. 7 Variation across provinces probably remained narrow in the late 1970s; even in areas that attained relatively high grain output levels, purchased shares were surprisingly low. For 170 commercial-grain counties, the purchased share was about 33 percent in 1979, whereas the national share in the same year was about 22 percent. Net grain shipments from these counties amounted to only about 19 percent of production. 8 For thirteen commercial grain areas including 247 counties and municipalities, the purchased share was 28 percent, the highest individual share among the thirteen being about 40 percent. 9 Table 2.2 presents data concerning purchases of all agricultural products, expressed as shares of gross agricultural output value. These more comprehensive data permit generalization of the results for grain alone. They are, however, subject to certain problems of interpretation. Purchases should be expressed as a share of the market value of final products, but this is not possible with the data available; gross value exceeds the appropriate output measure because some intermediate goods that are themselves products of agriculture may be doublecounted. Changes in the commodity composition of output and of purchases, in relative prices, and in the relationship between procurement prices and the prices used to calculate gross output constitute further potential complications in interpreting the data in table 2.2.

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ECONOMIC INTEGRATION

Table 2.2 Purchases of Agricultural Products in China, 1952-1982 Year

(1) 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 average 1953-57= average 1976-80'

Purchases by Commercial Departments (share of gross output value, percenti' (21 19.5 22.1 27.7 27.5 24.4 32.9 37.4 547 451 29.1 277 31.1 33.1 32.9 339 33.0 32.1 30.1 29.7 29.9 29.9 31.5 309 30.9 29.0 295 293 30.9 31.1 31.1 30.7

Total Iindex. 1952= 100)" 131 100.0 1087 120.7 124.8 119.2 128.5 132 8 158.5 120.7 87.9 91.1 1058 123 5 141.2 152.6 152 3 149.6 143.6 154.0 160.7 161.9 185.8 188.3 198.1 193.5 204.2 221.6 232.1 255.8 273.8 303 9

Purchases Ishare of gross output value, percent)' (41 305 327 35 7 339 31.5 405 40.6 562 48 1 367 36.1 37.1 37.6 36.9 380 37.3 36.4 342 329 33.3 33.6 35.6 34.9 35.6 34.1 35.3 35.6 37.6 38.6 388 389

27

120

35

30

221

36

SOURCE: SSB, Statistical Yearbook 1983. pp 16-17. 387, and 455 "Purchases of farm and sideline products in current prices as a percentage of gross value of agricultural output in current prices. Total purchases include purchases by industrial and other departments and by the nonagricultural population in addition to purchases by state commercial departments 'Total purchases in current prices divided by index of purchasing prices of farm and sideline products. 'Aggregated using weights based upon an index of agricultural gross output at comparable prices.

AGRICULTURE

37

T h e purchased share of gross output (column 4) follows a time path broadly similar to those followed by the purchased shares o f grain. In table 2.2, however, the purchased share for 1976-80 is almost the same as that for 1953-57—slightly over one-third o f gross output value for both periods. A small increase in the share o f gross output purchased by commercial departments was largely offset by a decrease in the share purchased directly by nonagricultural households and organizations. 10 Comparing 1976-80 with 1953-57 also reveals an increase of 84 percent in the volume of purchases (column 3)—a larger increase than in the case o f grain alone. Even on a per capita basis, total purchases increased some 18 percent. Tables 2.1 and 2.2 suggest that purchases of agricultural products other than grain increased rapidly between 1953-57 and 1976-80, both in absolute terms and as shares of output. Such increases are known to have occurred for certain cash crops (including cotton, sugar cane, and tobacco) and f o r certain animal products.11 More generally, since grain accounts f o r about half the gross value o f agricultural output, the purchased shares for grain and for all agricultural products imply that, during 1976-80, purchases of agricultural products other than grain amounted to roughly half the gross value o f such products. 12 T h e corresponding share for 1953-57 was significantly lower—perhaps 41-44 percent. 13 The shares for both periods are surprisingly low, in view of the fact that the state purchased almost the entire output of crops that are essential inputs f o r state industry. On the other hand, "agriculture" includes team and brigade enterprises, which produced over onetenth of gross agricultural output in 1976-80 but probably sold little of their output to the state or to the nonagricultural population. 14 The evidence in tables 2.1 and 2.2 indicates that the purchased share of gross agricultural output increased only marginally between the mid-1950s and the late 1970s and that the purchased share o f grain declined significantly over the same interval. T h e most appropriate measures of "commodity product i o n , " however, are not purchased shares, as defined in the tables, but rather the corresponding marketing rates—the shares o f output not retained by individual production units for their

38

ECONOMIC INTEGRATION

own use. Consideration of additional evidence strongly suggests that the purchased share data in tables 2.1 and 2.2 closely reflect the time paths of marketing rates in rural China. Consider changes in rural economic organization between the mid-1950s and the late 1970s. For a given pattern of exchange among farms, such changes could affect reported purchases. Suppose, for example, that two farms trade with each other through the state-operated commercial network in 1957; subsequently, the two farms are absorbed by a single rural organization that controls the distribution of total output between them. Even if the pattern of exchange between the two farms were to remain the same in 1979 as in 1957, reported gross purchases would decline. The commune system installed after 1957 might well be expected to introduce just this sort of complication. Several pieces of evidence, however, indicate that changes in rural organization since 1957 cannot account for the pattern of change in purchased shares. 15 First, most purchases were made from collectives in both 1957 and 1979. By 1957 almost all of the rural households in China belonged to advanced cooperatives which were typically divided into brigades, each with forty households, on average. In 1979 each basic accounting unit in the commune system included thirty-five households (about 160 persons), on average. 16 Hence, for those purchases made from collectives, the size of the relevant organization did not increase over the interval in question. Second, the net purchased share in table 2.1, which is not highly sensitive to changes in rural organization, shows a change over time similar to that of the gross purchased share. Third, even in the 1970s a significant share of the state purchases shown in table 2.2 were made from individual households rather than from collectives; for these purchases, changes in the size of collectives or in rural organization have no effect on the reported statistics. 17 Now consider rural fairs—marketing outlets that are not captured in the data of tables 2.1 and 2.2 and that could conceivably have been of considerable importance. The time paths of the purchased shares might differ from the time paths of the corresponding marketing rates if outflows from rural produc-

AGRICULTURE

39

tion units were diverted to rural fairs and were purchased directly by other rural units or by the agricultural population, rather than by state commercial departments. 18 Again, several pieces of evidence suggest that this did not in fact occur. First, total volume at rural fairs amounted to only about 9 percent of gross agricultural output during 1978-80 (and almost certainly amounted to a smaller share during the early and mid-1970s); sales on the free market accounted for 19.0 percent of agricultural income in 1952 and for 12.6 percent in 1957.19 Second, the state has virtually monopolized trade in major agricultural commodities, such as foodgrains and cotton, since 1953. Marketing of grain on free markets (in both rural and urban areas) amounted to well less than 2 percent of output in 1978-80.20 Finally, rural fairs were suppressed during 1958-59 and during much of the period from 1967 to 1977. By 1978 there were only about 33,000 such fairs in operation; by 1980, there were about 38,000—roughly the same number as in 1965.21 These considerations suggest that the changes reflected by the figures in table 2.1 are indicative of those that occurred in the marketing rate for grain (that is, in "commodity production") between the mid-1950s and the late 1970s. Both the share of grain output transferred to nonagricultural organizations and individuals and the share transferred within the agricultural sector probably declined. With somewhat less confidence, the changes in table 2.2 can be accepted as indicative of those that occurred in the marketing rate for total agricultural output (by value). The marketing rate for all agricultural output exclusive of grain probably increased, maintaining the overall marketing rate despite the decline in the marketing rate for grain alone. The available data therefore do not reveal substantial change in the extent of integration through specialization in production and exchange among economic units. China's experience, as reflected by the data in tables 2.1 and 2.2, differed significantly from the experiences of other large countries such as the Soviet Union and the United States. 22 In the case of the Soviet Union, the purchased share of grain output increased from less than 21 percent in 1925-27 to 26.8

40

ECONOMIC INTEGRATION

percent in 1928-32 and to 39.4 percent in 1954-58.23 The increase between 1925-27 and 1928-32 may be attributable primarily to the forced restoration of the purchased share to its prewar level; after 1928-32, however, annual purchases continued to increase, far outpacing grain production. In the case of the United States, by the 1880s and 1890s gross purchases of grain probably exceeded 50 percent of output, certainly a much larger share than in the late antebellum period. 24 Comparison of the data in table 2.1 with marketed shares in prewar China also suggests that the marketing rate for grain in China was not substantially higher in recent years than in the 1930s.25

B. Grain Production Patterns The marketing rates examined in section 2.A pertain to outflows of agricultural products from rural production units. These rates may be interpreted as upper bounds on the shares of domestic output flowing among provinces, but they do not indicate the precise volumes of such flows or the manner in which they have evolved. Provincial output data for the mid-1950s and late 1970s provide more direct evidence concerning the extent of provincial specialization and the probable volumes and patterns of interprovincial trade flows. This section examines provincial output data for foodgrains, which account for roughly one-half of gross agricultural output (by value) and for roughly five-sixths of the Chinese diet (by energy content). 26 Table 2.3 presents provincial grain output figures, on a per capita basis, for 1955-57, 1978-80, and 1979-81. The table presents three-year averages, rather than annual figures, in an attempt to capture long-run trends. Output data for single years may reflect substantial deviations from trend as a result of unusual weather conditions or other random disturbances. Furthermore, when changes in normal trade patterns are of interest, averages over several years are appropriate, in that they implicitly accommodate the possibility of a province's borrowing

AGRICULTURE Table 2 . 3

41

Grain Output per Capita, bv Province

Hank

Province and Average Annual Output per Capita (kg.) 1955-57

1978-80

1979-81

1

Heilongjiang

565

Heilongjiang

452

Heilongjiang

2

Jilin

436

Hunan

410

Hunan

416

3

Neimenggu

396

Zhejiang

393

Jilin

408

438

4

Jiangxi

366

Jilin

389

Zhejiang

393

5

Xinjiang

358

Jiangxi

378

Jiangxi

390

6

Anhui

353

Jiangsu

373

Jiangsu

381

7

Hubei

352

Hubei

368

Hubei

367

8

Gansu

345

Guangxi

331

Sichuan

350

9

Yunnan

327

Liaoning

331

Shandong

345

10

Guangdong

315

Shandong

329

Liaoning

342

11

Qinghai

315

Sichuan

321

Anhui

341

12

Zhejiang

313

Anhui

315

Guangxi

332

13

Sichuan

310

Fujian

307

Fujian

323

14

Hunan

308

Xinjiang

305

Henan

313

15

Fujian

297

Guangdong

303

Guangdong

306

16

Guizhou

294

Hebei

295

Xinjiang

306

17

Liaoning

292

Shanxi

294

Shanxi

303

18

Guangxi

291

Shaanxi

293

Shaanxi

290

19

Shaanxi

273

Henan

292

Hebei

288

20

Henan

265

Yunnan

268

Yunnan

274

21

Shandong

260

Gansu

260

Gansu

258

22

Shanxi

249

Neimenggu

249

Neimenggu

256

23

Jiangsu

243

Qinghai

236

Qinghai

232

24

Hebei

202

Guizhou

234

Guizhou

225

provincial data)

302

329

338

303

327

336

322

322

328

China (from China (from national data) Provincial average (unweighted)

SOURCES: POPULATION: appendix A. OUTPUT. 1955-57: Kenneth R. Walker. "Provincial Grain Output in China 1 9 5 2 - 5 7 , " ρ 4. OUTPUT. 1978: Kenneth R. Walker, "Chinese Agriculture During the Period of the Readjustment," pp 806-7, except Neimenggu and Jiangsu (excluding Shanghai); for Neimenggu, Kenneth R. Walker, Food Grain, pp. 319-20; for Jiangsu, Zhongguo baike nianjian bianjibu, Zhongguo baike nianjian 1980. p. 89. OUTPUT. 1979-80: Zhongguo Zhongguo

nongye nianjian

nongye nianjian

1981, pp 22 and 26-27. OUTPUT, 1981:

1983, pp 55 and 59.

NOTE: Figures pertain to unhusked weights. Grain includes potatoes (weighted at 4:1 for 1955-57 and 1 9 7 9 - 8 1 and at 5:1 for 1978-80) and soybeans. National totals do not include Xizang. Beijing and Tianjin are included in Hebei, Shanghai in Jiangsu. and Ningxia in Gansu. Each entry calculated as sum of grain output for three production years (April 1 - M a r c h 31) divided by sum of year-end population for three calendar years. Provincial population data for 1978-80 and 1979-81 do not include military personnel

42

ECONOMIC INTEGRATION

against its future output by temporarily drawing down local reserves. 27 Although 1978-80 (or 1977-79) may constitute a more appropriate terminal period in view of the post-Mao changes evident in table 2.1, 1979-81 is superior in terms of data availability and reliability. First, the provincial grain output data for 1978 were assembled from a variety of sources that may not be entirely consistent; indeed, the sum of the provincial figures exceeds the official total by 3.6 million tons. Second, data pertaining to potato output in 1978 are not readily available, precluding recalculation of the 1978-80 grain output figures on the weighting convention used for 1955-57.28 Finally, the 1978-80 output figures for several provinces do not pertain to geographical units of constant (or nearly constant) area, because an important boundary change occurred in mid-1979. Furthermore, since this change restored the pre-1969 boundaries of Neimenggu and adjacent provinces, the 1979-81 data pertain to units similar or identical in area to those of 1955-57.29 The data in table 2.3 reveal that China's grain output increased from slightly over 300 kilograms per capita in 1955-57 to nearly 340 kilograms in 1979-81; the median provincial output increased from 312 kilograms per capita to about 328 kilograms. The table also reveals some conspicuous changes in the provincial rankings. Neimenggu ranked among the top six provinces in 1955-57 and among the bottom six in 1979-81, while Jiangsu moved from the bottom six into the top six. Four other provinces—Xinjiang, Gansu, Yunnan, and Qinghai—also registered large decreases, and two provinces—Hunan and Shandong— registered large increases. 30 Interestingly, the range of provincial per capita output levels narrowed significantly between 1955-57 and 1979-81. In the earlier period, provincial output ranged from 202 to 565 kilograms per capita; in the later period, from 225 to only 438. Table 2.4 presents additional evidence pertaining to the dispersion of grain output levels across provinces. These data can be brought to bear directly upon the integration question: had specialization and interprovincial trade progressed significantly between 195557 and 1979-81, the dispersion of output among provinces would

AGRICULTURE Table 2.4

Period

43

Dispersion of Provincial Grain Output Levels Standard Deviation

Coefficient of Variation

(of provincial output per

(of provincial

capita, in kilograms)

output per capita) 24 Provinces'

Index of

Dissimilarity

(between provincial and population,

1955-57

72

.22

1955 1956 1957

80 77 69

.25 .23 .22

1978-80 1979-81 1979

55 57 63

.17 17 19

1980 1981

56 58

.17 .18

1955-57

76

24

7.1

1978-80 1979-81

52 52

.16 15

5.6 5.3

output percent)

72

5.8 5.8

20 Provincesf

SOURCES: See table 2.3. NOTE: Grain is unhusked and includes soybeans (at natural weight) and potatoes (at 4:1; except 1 9 7 8 - 8 0 , 5:1). Index of dissimilarity calculated using sum of provincial grain output figures and sum of provincial populations. 'Excluding Xizang, Beijing and Tianjm included in Hebei, Shanghai in Jiangsu, and Ningxia in Gansu. "Excluding Xizang; excluding Neimenggu, Gansu/Ningxia, Qinghai. and Xinjiang; Beijing and Tianjin included in Hebei. and Shanghai in Jiangsu.

have increased as some provinces concentrated heavily upon grain production and others moved into nongrain productive activities, relying upon interprovincial flows for their grain supplies. As shown in table 2.4, absolute dispersion, as measured by the standard deviation, actually decreased. This result persists when data for single years are substituted for three-year averages, when the terminal period is shifted to 1978-80, and when the peripheral provinces are omitted. Relative dispersion, as measured by the coefficient of variation, shows a similar decline, because the mean provincial output level did not decrease between 1955-57 and 1979-81. The last column of table 2.4 presents an "index of dissimilarity" between grain output and population. This index is defined as the share of China's grain output that would have to be redistributed to make the distribution of output among prov-

44

ECONOMIC INTEGRATION

inces identical to the distribution o f population among provinces. The decline in the index of dissimilarity over time indicates that the changes in absolute and relative dispersion are not misleading results attributable to differences in provincial populations. T h e index o f dissimilarity in table 2.4 may be interpreted as the net transfer o f grain to grain-deficient provinces (as a share o f total output) that would bring per capita availability in those provinces up to equality with national output per capita. Rather than requiring that the grain supply of each province reach the national average, one might require instead that the supply o f each province reach some specified level. If the level specified for each province can be interpreted as a minimum necessary supply, the modified index represents the net transfer to graindeficient provinces (as a share of total output) that would provide them with adequate grain. In table 2.5, the modified index of dissimilarity is calculated, using minimum provincial supplies o f 275 kilograms per capita in 1955-57 and both 275 and 300 kilograms per capita in 1979-81. A number of Chinese and Western sources suggest that, during the mid-1950s, 250-300 kilograms per capita constituted an adequate average annual supply of unhusked grain, for all uses. 3 1 For 1955-57, the minimum supply specified in table 2.5 is about 9 percent less than national output per capita, which is consistent with the fact that China's total grain supply was adequate but not abundant. By the late 1970s, grain requirements were probably higher than in the 1950s, due primarily to changes in the age structure o f the population and to increased feed requirements for livestock (especially pigs). 32 For 1979-81, the minimum supply of 300 kilograms in table 2.5 is about 11 percent less than national grain output per capita and 14 percent less than national grain availability per capita (including net imports), on the assumption that the needs of deficit provinces did not increase as rapidly as did national output per capita. Of course, the true " a d e q u a t e " level undoubtedly varied somewhat across provinces during both periods in question, due to differences in processing rate and nutritional value among grains, in feed and seed requirements among locales, and in population characteristics among provinces. 3 3

AGRICULTURE Table 2.5

45

Net Grain Inflows N e e d e d by Deficit Provinces Average

Annual

(kilograms Province

1955-57·

Hebei

73

Shanxi

26

1979-81"

Three-year Total Inflow (million tons)

1979-81'

1955-57'

12

10.4

44

32

5.0

Shandong

15

24

Henan

10

Jiangsu

1979-81'

24 1.1

2.5

63

1.4

Guizhou

50

75

4.2

Yunnan

1

26

0.1

Shaanxi

1979-81"

1.2 19

Neimenggu

Deficit

per capita)

2

10

0.1

2.5 0.9

Gansu

17

42

1.2

2.9

Qinghai

43

68

0.5

0.8

22

30

7.0

18.1

All deficit provinces

29

20.5

S O U R C E S : S e e table 2.3. N O T E : Beijing and Tianjin are included in Hebei, S h a n g h a i in Jiangsu. and Ningxia in Gansu. Grain is unhusked and includes s o y b e a n s (at natural weight) and potatoes (at 4:11. Xizang is excluded; otherwise, output per capita e x c e e d s the specified minimum in provinces other than those listed. ' M i n i m u m average annual supply: 2 7 5 kilograms per capita. " M i n i m u m average annual supply: 300 kilograms per capita.

Table 2.5 suggests that, in both 1955-57 and 1979-81, the net grain inflows required by deficit provinces were small, relative to total output. To attain the 275-kilogram standard in 1955-57, six provinces with over one-third of China's population required average annual net inflows of only about 6.8 million tons (roughly 3.6 percent of China's grain output). To attain the same standard in 1979-81, five provinces required net inflows of only 2.3 million tons (0.7 percent of output); to attain the 300-kilogram standard in 1979-81, seven provinces with one-fifth of China's population required net inflows of about 6.0 million tons (less than 2 percent of China's grain output). These results indicate that, as a share of total output, required net grain flows were significantly smaller in 1979-81 than in 1955-57. Indeed, if the share of net flows in total output were the same in 1979-81 as required in 1955-57, almost 320 kilograms per capita could have been made available in every province. Comparison of the data for 1979-81 with those for 1955-

46

ECONOMIC INTEGRATION

57 reveals an interesting change in the location of grain-deficient provinces. In 1955-57, the provinces with output levels below 275 kilograms per capita formed a single contiguous region, extending westward from the coastal provinces of Hebei, Shandong, and Jiangsu (figure 2.2). By 1979-81, the seven provinces with output levels below 300 kilograms per capita were located in the far North and West, with the single exception of Hebei (figure 2.3). A corresponding change occurred in the location of grain-surplus provinces. In 1955-57 three of the top eight producers (on a per capita basis) were located in the far North and West; by 1979-81, all three had fallen well below the median,

Figure 2.2 Grain-Deficit and Grain-Surplus Provinces,

1955-1957

NOTE: Grain-deficit provinces are those with average annual output per capita of less than 275 kilograms. Grain-surplus provinces are those with average annual output per capita of greater than 330 kilograms. Xizang is excluded. SOURCE: T a b l e 2.3.

AGRICULTURE

47

F i g u r e 2 . 3 Grain-Deficit and Grain-Surplus Provinces. 1979-1981 NOTE Grain-deficit provinces are those with average annual output per capita of less than 300 kilograms. Grain-surplus provinces are those w i t h average annual output per capita of greater than 365 kilograms. Xizang is excluded. SOURCE: Table 2.3.

and two had fallen far below even the 275-kilogram standard. With the exceptions of these provinces, the grain-surplus provinces in both 1955-57 and 1979-81 were located in the Northeast and along the Yangzi River. The observations concerning production patterns in this section are consistent with the changes in purchased shares of grain noted in section 2.A. 34 Both bodies of evidence suggest declining internal trade in grain (relative to total output). The changes in provincial patterns of grain output may explain much of the decrease in the total purchased share.

48

ECONOMIC INTEGRATION

C. Interprovincial Grain Flows

Evidence concerning interprovincial flows themselves can be used to address an important question left unanswered by the calculations in the previous section: did grain-deficient provinces in fact receive the inflows needed to provide them with adequate grain supplies? This section examines the magnitudes and patterns of interprovincial grain flows in the 1950s and 1970s, asking in particular whether or not the tentative general conclusions suggested in the previous section can be supported with more direct evidence. Kenneth Walker's reconstruction of grain inflows and outflows by province and by year (for the 1950s) and fragmentary evidence concerning individual provinces (for the 1970s) provide the basis for this inquiry. Table 2.6 presents data concerning flows of state grain from grain-exporting provinces in the 1950s, in 1965, and in 1978— 79. These data clearly indicate that, as expected, only a small portion of the grain procured from domestic sources has crossed provincial boundaries. For example, of the 48 million tons procured each year on average during 1955-57 (table 2.1), only about 10 million tons moved interprovincially to supply chronically deficient areas, disaster-stricken areas, and foreign markets. The magnitudes shown in table 2.6 for 1955-57 agree closely with the calculated total requirements of grain-deficient provinces during the same period, when exports to foreign markets are taken into account. The net annual requirements of graindeficient provinces averaged slightly less than seven million tons (table 2.5), whereas provincial outflows, net of grain destined for foreign markets, averaged about 7.7 million tons. 35 Provincial outflows (less exports to foreign markets) would typically exceed net inflows to grain-deficient provinces, because some provinces other than those identified as grain-deficient actually received net inflows and because some provinces both imported and exported grain in order to adjust composition or distribution. During 1955-57, the largest provincial grain inflows were those to Hebei (including Beijing and Tianjin) and Jiangsu (including Shanghai), which together accounted for well over

49

AGRICULTURE Table 2 . 6 Total Grain Outflows from Provinces, 1 9 5 3 - 1 9 7 9 Outflows Imillion

tons,

Ishare of output,

Year

unhusked)

1953

10.1

6.1

1954

10.2

6.0

1955

12.3

6.7

1956

8.2

4.2

1957

9.1

4.7

1958

8

4

1965

5.7

2.9

1978

25

0.8

1979

3.8

1.1

percent)

SOURCES: EXPORTS. 1 9 5 3 - 5 7 : Walker. Food Grain, ρ 85. EXPORTS. 1958: estimated using Audrey Oonnithorne, China's Grain, p. 15; SSB, Statistical 1 9 6 5 - 7 9 : Nicholas R Lardy, Agriculture, Yearbook

Yearbook 1983, p. 422: and the 1957 figure. EXPORTS.

p. 46. converted to unhusked grain. OUTPUT: SSB,

Statistical

1983, p. 158.

NOTE: Figures include grain destined for foreign markets. Beijing, Tianjin, and Shanghai are treated as separate provinces.

one-half of all interprovincial grain transfers. 36 Hebei received, on average, about 2.9 million tons per year, somewhat less than needed to provide an adequate supply of 275 kilograms per capita (table 2.5). Jiangsu received about 1.8 million tons per year, somewhat more than needed to attain the 275-kilogram standard. In addition to Hebei and Jiangsu, Liaoning and Shanxi received regular inflows, the former even though local production provided an adequate supply. 37 Shandong (which was grain-deficient with respect to the 275-kilogram standard) and several other provinces received inflows in one of the three years; however, Shaanxi and Henan (both grain-deficient) received no inflows— and were in fact grain exporters. With the exceptions of the four regular importers and perhaps Xinjiang, Qinghai, and Fujian, all other provinces exported some grain in at least one of the three years, 1955-57. The bulk of this grain, however, originated in a few areas with substantial grain surpluses and near major transport arteries. During 1955-57, over one-half of the grain moved across provincial boundaries was supplied by Heilongjiang, Jiangxi, Hunan, and

50

ECONOMIC INTEGRATION

Sichuan. Heilongjiang produced by far the highest output per capita in China; Jiangxi ranked fourth. Sichuan and Hunan, while producing modest surpluses on a per capita basis, were readily accessible by water and (as of 1956, for Sichuan) by rail. Jilin, with the second highest output per capita during the 1955-57 period, supplied outflows in 1955 and 1957 but received inflows in 1956, a year of unusually poor harvests. Returning to table 2.6, comparison of the data for 1978— 79 with those for earlier years reveals a marked decline in the volume of grain outflows. During 1978-79, outflows amounted to less than 1 percent of China's total output—and over one-half of this grain was destined for foreign markets. 38 Comparison of the data for 1978-79 with the calculated requirements of grain-deficient provinces (table 2.5) reveals that grain procured from domestic supplies was not sufficient to meet the needs of the poorer areas; in fact, during this period, China was a net importer of grain. The evidence in table 2.7 yields a more detailed picture of interprovincial flows during the late 1970s. These data are again consistent with the general conclusions suggested in the previous section concerning China's internal grain trade. In particular, all of the provinces producing 306 kilograms or less per capita received inflows, roughly consistent with the 300-kilogram standard used in table 2.5. All but one of the provinces producing more than 365 kilograms per capita were significant exporters; the single exception was Jiangsu (including Shanghai), where the municipality's imports undoubtedly exceeded the exports of Table 2.7.

Grain Inflows and Outflows, by Province, 1970s and Early 1980s Gram Output per

Province

Capita

1979-81

Outflows

Inflows

(annual

average.

1million

(million

tons per year)

tons per year)

kilograms)

Heilongjiang

438

Hunan

416

Comments

1970s: 0.919 1979: 0 5 2 9 1978: 0.5, rice

iarge exporter

1979: 0.666 Jilin

408

Zhejiang

393

exporter 1977" small 1978: 0.1

Jiangxi

390

1978: 0 2 6 5

1 9 7 4 - 7 6 : 0.158

large exporter, c 1979

51

AGRICULTURE

Table 2.7 (Continued)

Province Jiangsu (including Shanghai!

Grain Output per Capita 1979-81 Iannual average, kilograms) 381

Outflows (million tons per yearI

1978: 0.356 1970-75: 0.146 1979: 0.117 mid-1970s: 0 2 - 0 3 1976: 0 581

Inflows (million tons per year)

Hubei Sichuan

367 350

Shandong

345

Liaoning Anhui Guangxi

342 341 332

Fujian Henan

323 313

Guangdong

306

1980-81: 0.7

Xinjiang

306

Shanxi

303

late 1970s: 0.5 1980-81: 0.2 1980-81: 0.67

Shaanxi

290

Hebei (including Beijing and Tianjin) Yunnan

288

274

Gansu (including Ningxia)

258

Neimenggu Qinghai Guizhou

256 232 225

1976-77. 0.729

Comments large net importer; Jiangsu (excluding Shanghai), large exporter, 1978-79 large exporter since 1980: selfsufficient late 1970s: selfsufficient

1979-81: 1.3 1979: 0.8 1978: 0.025

since 1976: net importer since 1976: 0.1

mid-1970s: small 1977: 0.465

late 1970s: probably self-sufficient 1976-78: selfsufficient; since late 1970s: large importer

importer in most years

late 1970s: 0.5-0.7 large importer; Hebei (excluding cities) importer in most years 1977: 0.26 1980-81: 0.71 1970s: ~ 0.6 (Gansu only) 1980-81: 0 145 (Ningxia only) 1978: 1.4 1979: 0.203 1970s: 0.5-0.7 1979-80: 0.5

regular importer

SOURCES: Table 2.3, and Walker, Food Grain, pp 187-90; with additional data from Lardy, Agriculture, pp. 63 (Shanxi, Shandong, and Hebei) and 51 (Hunan and Zhejiangl; Judy Barfield, "Agricultural Statistics Project," p. 158 (Zhejiang); and Liu Zhongyi and Liu Huachuan, "Nongye jiegou," p. 143. NOTE: Provinces are arranged in descending order by average output per capita, 1979-81.

52

ECONOMIC INTEGRATION

Jiangsu proper. Finally, an intermediate group of seven provinces includes one large importer (Liaoning), one exporter (Anhui), and five provinces that appear to be only occasional small traders. Although the grain-deficient provinces did receive inflows during the late 1970s, in some cases the magnitudes of these inflows probably were not sufficient to provide adequate grain supplies. Guizhou, for example, appears to have received far less than the 1.4 million tons per year needed to attain even a 275kilogram per capita supply. Somewhat earlier, Sichuan had also received far less than needed, given shortfalls of almost 0.9 million tons in 1975 and 1.5 million tons in 1976 (relative to the low 275-kilogram standard) and a barely adequate output of 285 kilograms per capita in 1977.39 Yunnan, Qinghai, and Gansu/Ningxia do not appear to have approached the 300-kilogram level. Reports concerning grain consumption in the Southwest and grain self-sufficiency in the Northwest also indicate that inflows of grain to provinces in these regions were rather meager. During 1976 peasant rations in Guizhou were 23.4 percent less, and the quantity of grain available for the nonagricultural population 28.2 percent less, than the corresponding national averages for 1975. If rations claimed at least the same share of total supply in Guizhou as nationwide, the grain supply in Guizhou was no more than 225-235 kilograms per capita. 40 During 1978, peasants in Yunnan consumed about 183 kilograms of grain per capita, some 26 percent below the national average. 4 1 According to reports of the mid-1970s, Qinghai, Gansu/Ningxia, and Shaanxi all attained self-sufficiency in grain—with output levels of 285, 228, and 284 kilograms per capita in the years of their first such reports. 4 2 Although these reports are not entirely consistent with the magnitudes shown in table 2.7, they do support the inference that inflows to some grain-deficient provinces have been smaller than those implied by supplies approaching 300 kilograms per capita. The rather meager inflows suggested by reports concerning individual provinces of the Southwest and Northwest are also consistent with more general evidence pertaining to state subsistence rations. Recent studies find that the state attempted

AGRICULTURE

53

to provide a minimum consumption level of 150-200 kilograms— significantly less than that obtainable from a total supply of 275 or 300 kilograms per capita. 43 In fact, even the subsistence ration was not always provided. According to one recent report, about 20 percent of all production teams in China distributed less than the subsistence ration during 1978; in Qinghai and Gansu/Ningxia the corresponding shares were 30 percent, and in Guizhou and Neimenggu, 40 percent. 44 Other sources report that roughly 11 percent of all basic accounting units in rural China distributed less than 150 kilograms per capita in 1978 and 1979, and that some 100 million peasants had insufficient grain.45 In some counties, average rural consumption levels as low as 100-120 kilograms occurred. 46 While some of these severe local shortages certainly reflect problems of distribution within provinces that were not grain-deficient, most do reflect inadequate provincial supplies. 47 Turning from provincial inflows to outflows, an examination of the volumes reported in table 2.7 for high-output provinces reveals some substantial decreases relative to 1955-57, as might be expected given a markedly smaller total trade in domestic grain. In the late 1970s, no province supplied outflows approaching those originated by Heilongjiang and Sichuan during the earlier period. In general, grain outflows seem to have become more localized, in terms of originating areas. Eight provinces exported grain in 1978 and eleven were able to export in 1979, whereas most provinces were exporters in the mid-1950s. 48 The burden of grain outflows upon the principal suppliers was quite small by the late 1970s. Outflows from Heilongjiang and Hunan, two of the largest exporters in 1979, amounted to less than 3 percent of output in each province, and each retained over 400 kilograms per capita. 49 In fact, during the late 1970s and early 1980s the largest grain flows in China were not transfers from high-output to low-output provinces, but rather inflows of foreign grain to coastal provinces, including some with relatively high output levels. During 1978-80, imports averaged over 11 million tons annually. 50 The municipalities of Beijing Tianjin, and Shanghai received almost five million tons of grain in 1979-80, most of which was imported. 51 A substantial portion of the inflows to

54

ECONOMIC INTEGRATION

Liaoning (averaging over a million tons annually) certainly consisted of wheat imported via Luda for urban areas, supplementing domestic grain moved in by rail from Heilongjiang and Jilin. Guangdong received large inflows of imported rice and wheat for the city of Guangzhou. And foreign grain almost certainly reached cities in Shandong (via Qingdao and Yantai), Hebei (via Tianjin), Jiangsu (via Lianyungang), and provinces along the lower Yangzi. 52 These observations concerning inflows to grain-deficient provinces, outflows from grain-rich provinces, and imports of grain into China suggest several conclusions. First, graindeficient provinces in the interior did receive inflows during the late 1970s, but these inflows were not generally sufficient to provide adequate supplies (and uneven distribution within individual provinces left some areas with severe shortages). Second, interprovincial flows of domestic grain were certainly smaller during the late 1970s than during the mid-1950s. More specifically, flows from grain-rich provinces do not seem to have been diverted to the Southwest and Northwest when former recipients of grain inflows along the coast obtained adequate supplies through local production and imports. Instead, grain-rich provinces retained large supplies for their own use. Third, because domestic grain flows were not generally diverted to grain-deficient areas in the interior, imports of foreign grain benefited the coastal cities and their former suppliers, not the interior provinces seriously in need of grain. Perhaps the most important long-term development underlying the new pattern of internal grain flows is the growth of per capita output in Jiangsu and in coastal provinces to the north. This development suggests a trend from an initial state of some interdependence in which the more industrialized and urbanized provinces obtained grain from other areas toward a state in which these provinces are essentially self-sufficient and hence independent of their former suppliers. Of course, this trend has been reinforced by the growth of grain imports. But even without imports, availability in Jiangsu increased from 243 kilograms per capita in 1955-57 to 381 in 1979-81 ; per capita output in Jiangsu has overtaken that in Sichuan, a former supplier (table 2.3).

55

AGRICULTURE

The movement of chronic grain shortages farther inland and their dispersion over wider and more inaccessible areas has clearly aggravated the logistics problem in grain distribution. In particular, it is not possible to directly alleviate these shortages through imports from abroad. The apparent failure to attack them by extracting more grain from potential domestic suppliers is one factor underlying the decline in grain procurement rates; interprovincial transfers planned for such purposes formerly constituted an important determinant of government procurement levels. Furthermore, the narrowing dispersion of per capita output levels across provinces may be partly attributable to the attempts of grain-deficient provinces to feed themselves by diverting resources from other uses into grain production. Finally, to place the recent Chinese experience in perspective, consider the internal grain trades of the United States and Russia in the late nineteenth century and of China before the 1950s. In the case of the United States, somewhat over two million tons of grain, mostly corn and wheat (including flour), moved from the West to the East by all routes in I860. 53 Thirty years later roughly 10 million tons of wheat and corn left primary markets in the Midwest each year, most of it destined for the Northeast and South; in 1890 the nine North Atlantic States produced only 36 percent of the wheat and 45 percent of the corn needed for local consumption. 5 4 In the case of European Russia, shipments of major grains (including flour) by rail and water increased steadily, reaching 12 million tons per year in the 1890s. 55 And in the case of Nationalist China, grain transfers from surplus to deficit provinces probably exceeded two million tons per year during 1930-36. 56

D. Industrial Crops

The evidence concerning foodgrain production and trade in sections 2. Β and 2.C consistently supports the fragmentation hypothesis. Between the mid-1950s and late 1970s, the dispersion of per capita output levels across provinces narrowed, and the

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net inflows needed by grain-deficient provinces to provide them with adequate supplies decreased. Actual flows of domestic grain among provinces decreased in absolute volume, while inflows to grain-deficient provinces (from both domestic and foreign sources) declined relative to total grain consumption and probably in absolute volume as well. This section inquires as to whether the sorts of changes observed for foodgrains also occurred for industrial crops. It cannot be assumed that foodgrains are representative of all field crops, in terms of changes in patterns of production and trade over the course of the Maoist era. Unlike foodgrains, industrial crops have generally claimed a small share of sown area—a total of 9.2 percent in 1955-57 and 10.2 percent in 1978— 80." The relatively small area planted to industrial crops implies that modest absolute changes in cropping patterns over time might translate into substantial relative changes in both provincial output levels and interprovincial trade flows. Furthermore, the purchased share of agricultural output has been higher for nongrain products (aggregated by value) than for grain, and while the purchased share decreased between the mid-1950s and late 1970s in the case of grain, it increased for major industrial crops (including cotton, flue-cured tobacco, sugar cane, and sugar beets). 58 Previous sections aggregated over all grain crops because individual foodgrains are in most cases fairly close substitutes for one another in consumption. 59 Since differences in the composition of grain supplies are admissible, there is no great need for interprovincial exchange of, say, wheat for rice. Of course, some such exchanges do occur, but they are small relative to the total receipts of provinces with net grain inflows. "Industrial crops," unlike foodgrains, do not constitute a meaningful category in terms of end use. Rather, industrial crops yield several distinct groups of products, across which possibilities for substitution are limited. 60 Hence there is substantial potential for trade in such products (in raw or processed form) if production within groups is not distributed fairly evenly among provinces (on a per capita basis). And since the selection of crops within a

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57

group is more limited than in the case of foodgrains, greater geographical concentration in production is likely; for s o m e regions, none of the crops within a group may be suitable. Tables 2.8 through 2.10 present evidence concerning production of several industrial crops. A s indicated in the tables, provincial statistics for industrial crops are generally less satisfactory than those for grain. Since reasonably complete data sets are available for only one year during the mid-1950s, the discussion in this section is based largely upon comparison of a single terminal year (1979) with the single initial year (1957). The crops in the sample (tables 2.8 through 2.10) are cotton, tobacco, peanuts, sugar cane, and sugar beets—the last two summed at their natural weights. Although cotton has potential substitutes, it remains by far the most important raw material for the textile industry. 6 1 Tobacco has no close substitutes, nor do the sugar crops. On the other hand, peanuts, as a source of edible oil, do have a number of substitutes—some of which are produced in large quantities in China. Collectively, the crops included in the tables accounted for 64 percent of the area sown to industrial crops in 1957 and for 55 percent in 1979.62 Table 2.8 presents indicators of the extent to which output of each crop was geographically concentrated in 1957 and in 1979. For a single crop, an increase in the share of total output contributed by the top three or five producers and a decrease in the number of provinces producing significant quantities might signal increasing interprovincial flows, relative to output (and, given constant or increasing total output, in absolute volume as well). Substantial increases in concentration for all or most crops might signal a general trend toward provincial specialization and interprovincial trade. The concentration ratios in columns 3 and 4 of the table reveal a mixed pattern, with clear increases for cotton and peanuts, possibly a small increase for tobacco, and a decrease for the sugar crops. Column 5 reveals a clear decrease in the number of provinces producing significant quantities of cotton and a clear increase for sugar crops; it is likely that an increase also occurred for tobacco. Interestingly even for those crops where the con-

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T a b l e 2 . 8 Provincial Concentration of Industrial Crop Output, 1957 and 1979

Crop (1)

Cotton' Tobacco" Sugar crops 1 Peanuts"

Total Output (million tons)

12) 1.6/2.2 4.2/9.4 11.9/24.6 2.8/2.8

Share in Total Three

largest

producers (percent) (3) -45/57 >45/49 67/62 -41/62

Output

Provinces

Five largest producers (percent)

5.000 tons or more

(4) -67/70 >66/71 83/78 -55/72

(5) 3=15/14 >10/18 11-16/23 s 15/17

producing

SOURCES: PROVINCIAL OUTPUT. 1957. COTTON: CEC, Provincial Agricultural Statistics for Communist China, except Guangxi and Yunnan; Guangxi, sown area (table 2.9) and yields from neighboring provinces; Yunnan, Chen Nai-Ruenn. Chinese Economic Statistics, p. 363 TOBACCO: Chen, Chinese Economic Statistics, pp. 3 4 2 - 6 3 , except Anhui, Fujian, Henan and Guangxi, sown areas (table 2.9), and yields from neighboring provinces. SUGAR CROPS: Chen, Chinese Economic Statistics, pp. 3 4 4 - 6 3 , except Neimenggu; concerning Neimenggu, Chen, Chinese Economic Statistics, p. 343, table 2.9, and Zhongguo kexue yuan, Nongye dili, p. 230. PEANUTS: Chen, Chinese Economic Statistics, pp 3 4 2 - 6 3 , except Liaoning, Guangxi, Hebei, Zhejiang, and Fujian; Liaoning, sown area and 1949 yield; others, sown area and yields of neighboring provinces. TOTAL OUTPUT, 1957: SSB, Statistical Chinese Economic Statistics, p. 339.

Yearbook

1983. pp 159-60, except tobacco; tobacco, Chen,

PROVINCIAL AND TOTAL OUTPUT, 1979: Zhongguo nongye manjian 1981. pp. 3 1 - 4 1 NOTE: Each entry includes a figure for 1957 followed by a figure for 1979. For identification of top five producers, see table 2.9. Number of provinces in column 5 based upon total of twenty-four. 'Reports from seventeen provinces account for over 98 percent of total output in 1957. One additional provincial output figure w a s estimated from sown area and an approximate yield. Treatment of municipalities in reports for Hebei and Jiangsu is unclear, but their shares in total output were small. "Reports from eight provinces account for 59 percent of total output in 1957 Four additional output figures w e r e estimated from sown areas and approximate yields, accounting for 20 percent. Some provincial reports may be too low because " n a t i v e " tobacco is not included. 'Reports from ten provinces account for almost 94 percent of output in 1957. One additional province w a s a large producer, but available reports yield inconsistent output figures. "Reports from eleven provinces account for about 62 percent of total output in 1957. Five additional figures were estimated from sown areas and approximate yields, accounting for about 20 percent.

centration ratios increased, a fairly large share of total output remained widely scattered among provinces. The absolute volumes contributed by provinces other than the top five producers doubled between 1957 and 1979 in the cases of tobacco and sugar crops. The data in table 2.8 are consistent with the observations of Chinese analysts who, using data for the 1970s, have characterized industrial-crop farming as combining elements of both

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concentration and dispersion. A few provinces maintained large shares in total output and in some cases became even more predominant, but at the same time production was initiated or continued by an extensive fringe of small producers. 63 In the case of sugar crops, for example, production of beets spread southward during the 1960s and 1970s until twenty provinces (out of twenty-four) could report some output in 1978 and 1979; by the late 1970s cane was being grown in fourteen provinces. Although every province in China produced sugar beets or sugar cane (or both) in 1978, 69 counties in Heilongjiang, Jilin, Neimenggu, and Xinjiang contributed 81 percent of total beet output, and 141 counties in Guangdong, Guangxi, Fujian, Yunnan, and Sichuan contributed 82 percent of total cane output. 64 Similarly, by 1978 twenty-two provinces were producing flue-cured tobacco, with significant new tobacco regions located in Hebei, Shanxi, Jiangsu, Zhejiang, and Jiangxi. 65 Twenty-two provinces were producing peanuts, with Shandong alone contributing about onethird of total output and with twelve small producers contributing one-tenth. In the case of rapeseed (another important source of edible oil), three provinces along the Yangzi contributed a large share of total output, with the remainder scattered among twenty other provinces. 66 The output data summarized in table 2.8 do not clearly reveal the extent to which individual provinces specialized in specific industrial crops, nor do they reveal changes in the pattern of specialization over time. To address these related questions, table 2.9 turns from evidence concerning output to evidence concerning sown areas. The table presents "location quotients," each of which compares a province's share in the national sown area for a particular crop with that province's share in the national sown area for all crops. 67 For example, the first entry in the table shows that in 1957 the share of Hebei's sown area planted to cotton was 2.5 times the corresponding nationwide share. Table 2.9 reports pairs of location quotients for all instances where one of the quotients (1957 or 1979) exceeds 1.25—in other words, for instances of substantial upward deviation from the crop-specific sown area predicted solely on the basis of national averages.

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Table 2.9 Provincial

Location Quotients for Area Sown to Industrial Crops. 1957 and 1979 Location

Province

Cotton"

Hebei (including Beijing

Quotients Sugar

Tobacctf

Crops'

—2.571.7*

Peanuts' -1.371.5·

and Tianjin) Shanxi

1.9 /I 7 0.8 /1.6

Neimenggu Liaoning

1.971.5

Jilin

2.7 12.2

Heilongjiang Jiangsu (including

5.873.0 -1.972.4·

-1.070.6

Shanghai) Zhejiang Anhui Fujian

0.7 /I 3

3973.0·

1.9 /2 2

Jiangxi Shandong

1.571.7*

1.872.0*

3 . 1 7 3 8*

Henan

1.671.7*

1.772.2·

1 3 7 0 9·

Hubei

2.2'HA'

Hunan

0.5 /1.5

Guangdong

0.9 /1.3

5.774.6·

2 0 /4.0*

Guangxi

0.7 /1.6

3.2744·

2 3

Sichuan

1.170.9'

1.270.8·

Guizhou

5.675.7·

Yunnan

4.673.9*

Shaanxi

122'

1.9 /2.0·

1.6 /I.6

Gansu (including Ningxia) 1.8 /0.1e

Qinghai Xinjiang

—1.8 /1.8

Share of crop in total

? /1.3

3.7 /3.0

0.3 /0.4

0.3 /0 6

1.6 /1.4

—27/28

>54/53

76/72

43/57

—81/79

>54/66

-82/77

52/72

sown area nationwide (percent) Share in national cropspecific s o w n area (percent) of provinces with quotients 5=1.95 of provinces with quotients 5=1.45 S O U R C E S : PROVINCIAL CROP-SPECIFIC S O W N AREA. 1957: U.S. CIA, "Agricultural Acreage in Communist China, 1 9 4 9 - 6 8 . " and (for sugar beets) Zhongguo kexue yuan, Nongye diti, pp. 2 2 9 - 3 0 PROVINCIAL TOTAL S O W N AREA, 1957: Walker, Food Grain, ρ 306, assuming figures for Beijing and Tianjrn are similar to that given for Shanghai Yearbook

NATIONAL CROP-SPECIFIC A N D TOTAL S O W N AREA, 1957: S S B ,

Statistical

1983, pp. 1 5 5 - 56, except tobacco, tobacco, U S CIA, "Agricultural Acreage." ρ 10 PROVINCIAL

A N D N A T I O N A L DATA, 1979: Zhongguo

nongye nianjian

1980, pp. 100 and 107-12

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NOTE: Each entry includes a figure for 1957 followed by a figure for 1979. Asterisks indicate five largest producers. The location quotient for crop / in province j is ^ λ , I

3 , / Σ a'i Λ . , — where a„ is sown to i in j 2,a" '

/

'Reports from nineteen provinces account for 99 percent of the total area sown to cotton in 1957. "Reports from twelve provinces account for 83 percent of the total area sown to tobacco in 1957. Data from one more province are available for 1949, from two more for 1952. from one for 1958, from one for 1 9 5 9 - 6 0 , and from one for 1 9 6 3 - 6 5 . In some cases available provincial reports may exclude "native" tobacco. 'Reports from nine provinces account for 98 percent of the total area sown to cane in 1957; one additional report is available for 1958 Reports from two provinces account for 93 percent of the total area sown to beets in 1957; additional data are available from one additional province for 1956 and 1958, from two provinces for 1958, and from two provinces for 1959. "Reports from fifteen provinces account for 92 percent of the total area sown to peanuts in 1957; one additional report (concerning peanuts) is available for 1 9 6 3 - 6 4 ; additional data (concerning peanuts and sesame) are available from three provinces for various years. Ί959/19/9

Location quotients are also reported for the top five producers of each crop, whether or not these quotients exceed 1.25. In most cases, the location quotients for the five large producers are relatively high—and higher in 1979 than in 1957. The most conspicuous exceptions to this generalization occur among the major producers of sugar; four of the five largest producers in 1957 show decreasing location quotients and for one of these (Sichuan) the quotient was not high in the initial year. Other exceptions include Hebei (for cotton), Henan and Jiangsu (for peanuts), and again Sichuan (for tobacco). Table 2.9 also permits systematic examination of changes over time within the set of provinces that have been relatively specialized in particular crops (whether or not they have been among the largest producers). In the case of cotton, the neighboring provinces of Hebei and Shanxi show decreasing location quotients, while four provinces farther to the south and east show increases. In the case of tobacco, four new provinces forming a contiguous region in southern China appear to have joined the four provinces farther to the north and west that had high quotients in the initial year. In the cases of sugar crops and peanuts, geographical patterns are less apparent, although in the

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former case all three of the provinces that were most specialized in 1957 were much less so in 1979. Finally, examining the data province by province turns up one distinctive case. Shandong was among the five largest producers of three crops in both 1957 and 1979 and for all three crops exhibited high and increasing location quotients. The individual location quotients in table 2.9, then, show no consistent overall pattern; in many cases, provincial specialization (relative to the nationwide average) did increase, but in others it decreased substantially. The last two lines of the table summarize changes in the extent of specialized production for each crop. For example, the data for cotton indicate that in both 1957 and 1979 somewhat over one-fourth of the total sown area was located in two provinces with location quotients exceeding 1.95, and over three-fourths in eight provinces with quotients exceeding 1.45. In both years the remainder was scattered in at least ten more provinces. 68 Unlike the summary data for cotton, those for sugar crops and peanuts reveal clear trends— but in opposite directions. The data for tobacco are inconclusive. Consistent with the output data, the summary statistics in table 2.9 generally suggest that production has continued in nonspecialized areas and, in some cases, suggest diffusion into new areas. Table 2.10 returns to the data concerning output of industrial crops. The fact that a few provinces produced a large share of total output would be of little interest if the same provinces claimed a similar share of population. Table 2.10 examines the relationship between the distributions of output and population among provinces; as in tables 2.4 and 2.5 (for grain), the key indicator employed is the index of dissimilarity. Here, however, the evidence is viewed from the perspective of provinces with high per capita output levels, rather than from the perspective of probable importers. 69 As indicated in column 2 of the table, the indexes of dissimilarity show increases except in the case of sugar crops. In most cases, then, the direction of change in this sample differs from what one might predict on the basis of the corresponding

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T a b l e 2 . 1 0 Relationship Between Population Distribution and Output Distribution for Industrial Crops, 1957 and 1979 Potential Surplus" Crop IV Cotton Tobacco Sugar Cropsc Peanuts

Index of Dissimilarity' (2) -40/41 -34/42 62/56 28/45

(million tons) 131 -0.35/0.69 -0.1/0.27 5.9/11.4 4.7/9.3

(share of national Provinces with output, percent) Potential Surpluses 14) (5) 5/4 -21/31 5/4 -21/28 50/46 5/5 17/33 2/3

SOURCES: OUTPUT: see table 2.8. POPULATION: see appendix A NOTE: Each entrY includes a figure for 1957 followed by a figure for 1979.

'Between provincial output and population (in percent) 'Surplus provinces are those with per capita output levels exceeding the nationwide level by at least 50 percent. Nationwide output per capita (in kilograms) was: for cotton, 2.5/2.3; for tobacco, 0.7/1.0; for sugar crops, 18.4/25.4; and for peanuts, 4.3/2.9. The potential surplus is the amount that, if transferred from surplus provinces, would leave them with per capita supplies (from local production only) 50 percent above the nationwide per capita output level. See text for discussion. 'Extraction rates for cane and beet differ somewhat; in terms of refined sugar, directions of change would remain the same

result for grain. It is also true that the share of total output contributed by provinces with high output per capita increased between 1957 and 1979 in two cases and that the highest provincial output per capita increased in all four cases (even though two of the four corresponding nationwide levels decreased). Columns 3 and 4 in table 2.10 show the volume (absolute, and relative to output) of net interprovincial transfers that would be needed to effect a fairly even distribution of each product across provinces. The calculations summarized in the table are based upon the assumption that provinces with high per capita output levels retain per capita supplies 50 percent above the national per capita supply from domestic production. 70 Of course, these calculations cannot be interpreted as providing indications of actual flows in 1957 and 1979. Interestingly, however, the potential surpluses of high-output provinces increased in all four cases in absolute terms, and in three cases relative to total output. In summary, the evidence concerning industrial crops in tables 2.8 through 2.10 presents a mixed picture. Most signif-

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icantly, the data do not consistently support the fragmentation hypothesis, as did those pertaining to grain. On the other hand, in at least two respects, the data for industrial crops belie the existence of a strong trend toward the increasing specialization and geographical concentration associated with the growth of interregional trade. First, for each of the industrial crops examined, a fringe of nonspecialized small producers has survived and has continued to produce a significant portion of total output. More importantly, in some cases this fringe appears to have grown, at least in terms of the number of provinces involved. Second, the share in nationwide area sown to a particular crop that is located in specialized provinces can be said to have substantially increased in only one of four cases. Unfortunately, data concerning interprovincial trade in products of industrial-crop farming are not readily available, precluding reconstruction of actual interprovincial flows in any detail. Viewed against the background of provincial production patterns, however, bits of additional evidence do indicate that fragmentation affected the evolution of internal trade in industrial crops as well as grain. In the case of cotton, several observations suggest that interprovincial trade in the raw material itself decreased, relative to output, between the mid-1950s and late 1970s. During the earlier period, Jiangsu (including Shanghai) was undoubtedly the major recipient of cotton inflows. Shanghai alone produced 265,000 tons of yarn (over 30 percent of national output) in 1957, using far more cotton than was produced in all of Jiangsu. 71 Hebei, Henan, and Shandong were major exporters. Shipments from Hebei and Henan amounted to over 40 percent of local output in the 1950s, and those from Shandong approached 40 percent in some years, suggesting that outflows from the three provinces totalled roughly 250,000 tons per year. 72 Much of this cotton was certainly destined for Shanghai and other cities in Jiangsu. By the late 1970s the principal internal flow of the earlier period had greatly diminished, due to changes in the distributions of cotton output and of textile capacity. By 1979 Jiangsu had become the largest producer of cotton in terms of total output

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65

(and the second largest on a per capita basis). Total output in Hebei, Henan, and Shandong had decreased by more than 28 percent with a small increase in Henan partially offsetting decreases in the other two provinces. Textile output in these three provinces had increased quite rapidly, so that by 1979 local supplies of cotton were insufficient and the three provinces were receiving inflows. 73 And in 1979 China imported 550,000 tons of foreign cotton—up from 50,000 in 1957; most of this imported cotton was probably destined for Shanghai and other cities in coastal provinces. 74 The geographical dispersion of textile capacity and the persistence of cotton production in many provinces suggest the possibility that the distributions of raw cotton output and of cotton textile output have become more similar.75 This development would imply relatively more local processing and relatively less interprovincial trade in the raw material. On the other hand, the low per capita output of cotton in some provinces suggests substantial interprovincial flows of cotton at some stage of processing—perhaps increasingly in the form of cloth rather than raw cotton. The existence of a rationing system to constrain consumption of cotton products in favorably endowed areas suggests some commitment to effecting such flows. In the case of tobacco, a high correlation between provincial output of tobacco and provincial output of cigarettes in recent years again suggests limited interprovincial flows of the raw material.76 The principal recipient of such flows has been Jiangsu (including Shanghai), where production of cigarettes required about 88,000 tons of tobacco in 1982, ten times the output of Jiangsu in the same year. Hebei and Zhejiang were also importers. Inflows to the three provinces probably totaled between 150,000 and 180,000 tons. The major exporters of tobacco were undoubtedly Shandong, Henan, Guizhou, and Yunnan, and to a lesser extent, Heilongjiang. The data for most other provinces reveal much smaller absolute deficits or surpluses in 1982. The data for 1979 are incomplete, but it appears that the evidence for 1982 is broadly indicative of the pattern of internal trade prevailing in 1979 as well. 77 The volume and pattern of internal flows during

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the 1950s, however, are less clear. Shanghai appears to have imported much larger quantities of raw material in the earlier period, and capacity in the tobacco industry was much less dispersed among provinces. These two observations suggest that interprovincial flows of tobacco decreased between 1957 and 1979, although the direction of the major flow was similar in the two periods. It is also possible that trade in final products decreased. 78 In the cases of sugar crops and peanuts, very little supplementary evidence can be brought to bear upon the fragmentation issue. Guangdong, by far the largest producer of sugar, exported more sugar in 1980 than in 1957; however, the share of exports in provincial output decreased from 60 percent to less than 40 percent. 79 This single observation seems consistent with the sets of provincial data summarized in tables 2.8 through 2.10, where sugar production exhibited increasing geographical dispersion, indicative of decreasing trade (relative to output). Shandong, by far the largest producer of peanuts, is known to have exported peanut oil during the 1950s.80 In view of the increase in per capita output of peanuts in Shandong between 1957 and 1979 and the decrease in per capita supplies of edible oil nationwide over the same period, it seems likely that exports from Shandong increased. More generally, however, the trend for edible oil was probably in the opposite direction. Although direct evidence is lacking, a significant decrease in the purchased share of edible oil is consistent with this suggestion. Purchases averaged 1.4 million tons annually (80 percent of output) in 1955-57 and increased only slightly, to 1.5 million tons (64 percent) in 1978-80.81 These observations concerning interprovincial trade in products of industrial-crop farming sharpen somewhat the inconclusive picture drawn on the basis of production data alone. The entire body of evidence examined in this section, however, will support only a highly tentative general conclusion. The evidence indicates that, although some changes in the direction of greater provincial specialization and interprovincial trade occurred, there was not a general movement in this direction over the course of the Maoist era. And the changes that did occur seem

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unremarkable; accompanying substantial improvements in transportation, one might well have expected a more pronounced definition o f specialized crop zones and a marked jump in the volume o f interprovincial trade.

E. Vegetables and Meats This section briefly considers evidence concerning production and trade patterns for vegetables and meats (and live animals for slaughter). Output o f vegetables alone totaled well over 100 million tons annually during the late 1970s, far exceeding the output (by weight) of all industrial crops combined. 8 2 Of course, in a poor country interregional trade in vegetables and meats is likely to be quite small, relative to output, due to the perishable nature o f the fresh products, the undeveloped state of the food-processing industry, and the shortage o f appropriate transportation and storage facilities. But even though the magnitudes involved are small, changes over time are still relevant to the fragmentation issue. In the case o f vegetables, available data are insufficient to quantify changes in either the distribution o f output or the volume and pattern o f interprovincial trade. 8 3 According to one informed observer, however, " t h e course of economic development in China has seen an ever closer approximation o f selfreliance on local production and no perceptible trend towards developing specialized areas of vegetable production or encouraging interregional supply." 8 4 Provision of adequate supplies to cities was undoubtedly the major objective underlying whatever significant trade did occur during the Maoist era. In each of the municipalities visited by an American delegation in 1977, however, local production supplied over 85 percent of the vegetables consumed by the urban population. Unsurprisingly, a limited variety was available in each municipality, and per capita consumption of vegetables varied considerably, even within regions. 85 Chinese reports

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confirm that by the mid-1970s many large cities, including Beijing, Tianjin, Shanghai, Wuhan, and Guangzhou, were essentially selfsufficient; inflows of vegetables, intended to provide more variety, amounted in each case to less than 10 percent of total supply. 86 Beijing's self-sufficiency reportedly dates back to the 1960s; in 1980 the municipality produced almost 200 kilograms per capita, exceeding the average consumption level nationwide. Output in Tianjin was also sufficient to provide a per capita supply exceeding the national average. Shanghai, an importer in the 1950s, was ''basically self-sufficient'' in 1979, with local output providing a per capita supply slightly below the national average. 87 Reports concerning interprovincial trade in vegetables are scarce. Regular seasonal shipments have probably moved from south to north and from east to west in recent years, with additional irregular shipments in cases of unusual surplus or severe shortage. 88 In 1978, for example, Shenyang (in Liaoning) shipped 750 tons of vegetables to Beijing; Wuhan (in Hubei) shipped 15,000 tons to other provinces and to Hong Kong and Macao; and Anhui shipped unspecified quantities to other provinces. 89 The processing industries of Jiangsu (including Shanghai) and Zhejiang probably received some such shipments and distributed products interprovincially as well. The volumes involved, however, were small, since the output of all canned foods in the two provinces averaged less than 200,000 tons annually during the late 1970s and a large share of this output was undoubtedly exported. 90 If interprovincial flows of vegetables during the late 1970s were in fact as modest as these bits of evidence suggest, substantial increases (in absolute volume) could not have occurred over the course of the Maoist era. In the case of meats, narrow dispersion of per capita output levels across provinces is a conspicuous aspect of the 1979 production pattern. Sixteen (of twenty-four) provinces produced between 7.4 and 11.5 kilograms of pork, beef, and mutton per capita. No more that three or four provinces could have provided substantial outflows of these products, and no more than five required inflows. 91

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Direct evidence concerning trade in fresh and frozen meats is scarce. Heilongjiang, with per capita output slightly above the nationwide level, received about 15,000 tons of frozen pork from other provinces in 1979.92 The large municipalities of Beijing, Tianjin, and Shanghai might also be expected to have imported large quantities. In fact, per capita output of pork, beef and mutton in Beijing and Shanghai exceeded the national average; Beijing was reportedly almost self-sufficient in livestock, and local production provided over one-half of the total supply of pork in Shanghai.93 Tianjin was exceptional among the three in that output per capita fell short of the national average. 94 It is likely that inflows of meat to Shanghai originated largely in Jiangsu itself and, to a lesser extent, in the neighboring province of Zhejiang, since both were large producers. On the other hand, Hebei certainly received large inflows from other provinces, since output per capita (in Hebei inclusive of Beijing and Tianjin) was some 30 percent below the average. A fairly narrow dispersion of meat production levels across provinces does not preclude the possibility of substantial trade in live animals for slaughter and especially in hogs, which provided over 94 percent of China's meat during the late 1970s. In 1978, however, only about 12 million hogs—7.5 percent of the number slaughtered that year, or slightly over 4 percent of the total stock—were shipped across provincial boundaries.95 About 2.5 million of these were exported, mostly to Hong Kong via export posts operated by several provinces in the border town of Shenzhen, leaving the equivalent of roughly 550,000 tons of pork for domestic distribution.96 As two Chinese observers note, these data reveal that production of hogs for slaughter has been pretty much a matter of provincial self-sufficiency. 97 As in the case of vegetables, comparing the pattern of interprovincial trade in meats and live animals during the late 1970s with that during the 1950s is difficult, given the volume and nature of the evidence readily available. The data do reveal, however, some interesting changes over the course of the Maoist era. First, on a per capita basis, the year-end stocks of hogs

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in Jiangsu and Zhejiang were far above the nationwide level in 1979, whereas both had been at or below the nationwide level in 1957. This change suggests reduced dependence upon inflows of pork for Shanghai and other cities of the lower Yangzi by the late 1970s; indeed, Shanghai itself had imported almost all of its pork supply in the 1950s.98 Large cities in other regions may also have been more dependent upon inflows in earlier years; as late as 1974, Beijing reportedly produced only one-third of the pork needed for local consumption." Second, fragmentary evidence suggests that shipments of meat and live animals from grazing areas, primarily in the far west, decreased between the mid-1950s and late 1970s. Although total purchases of beef cattle and mutton sheep were 27 percent larger (by number of animals) in the single year 1979 than in 1957, purchases during 1976-78 show almost no increase over 195557.100 And purchases of livestock from ten provinces with grassland areas decreased by 15 percent between 1965 and 1975, as purchases of cattle and sheep fell 12 percent nationwide. 10 ' The livestock inventory in Xinjiang decreased by 12 percent between 1965 and 1977, and the livestock inventory of Neimenggu may have decreased as well. 102 Furthermore, the meat yield per animal decreased in some areas of Qinghai and perhaps in other far western provinces. 103 With large increases in population occurring over the same period, these observations suggest that local consumption of meat may have claimed an increasing share of output in areas producing cattle and sheep for slaughter. In Tianjin, a likely importer of meats, consumption of beef and mutton was only 0.4 kilograms per capita in rural households in 1978, and 1.6 kilograms in urban households—with the latter figure somewhat lower than that reported for 1927-28.104 Third, although data concerning total meat supplies are not available for the 1950s, data concerning hog inventories in 1957 and 1979 do indicate that the distribution of hogs across provinces was more similar to that of population in the later year. 105 This change is consistent with the decreasing dependence of the North and East upon meat supplies from provinces to the west.

AGRICULTURE

71

The provincial data for 1979 and the fragmentary evidence concerning changes since the 1950s suggest that, relative to output, there was little or no increase in the volume of interprovincial trade in meat (and in live animals for slaughter) over the course of the Maoist era. As in the case of vegetables, the increasing self-sufficiency in areas most likely to have been major importers and the absence of any clear trend toward greater concentration of output in specialized zones seem to be the most important aspects of changes in the pattern of production and the major factors underlying changes in interprovincial trade.

F. Backward Specialization and Interprovincial Trade A tendency toward economic fragmentation implies that poorly endowed provinces, left increasingly to their own resources, will remain relatively specialized in production of necessities such as grain or will shift toward even greater specialization in these products. On the other hand, more richly endowed provinces will be able to diversify. Since these changes associated with fragmentation may frequently run counter to the comparative advantages of individual provinces, observation of substantial reallocations contrary to comparative advantage would suggest that fragmentation had in fact occurred. In some cases, the evidence in previous sections seems consistent with these implications of the fragmentation hypothesis. For example, the share of Hebei's total sown area planted to cotton decreased markedly between the mid-1950s and late 1970s. Whereas in 1957 Hebei had a larger share of its sown area under cotton than did any other province, by 1979 it was no longer among the most highly specialized cotton producers. Over the same period, Hebei substantially improved its grain-supply position, with output increasing from just 202 kilograms per capita in 1955-57 to 288 kilograms per capita in 1979-81.106 Chinese and Western analysts agree that these changes reflect one important instance of the backward specialization anticipated in

72

ECONOMIC INTEGRATION

grain-deficient provinces, since Hebei has a strong comparative advantage not in grain, but in cotton. 107 In order to further investigate the significance of backward specialization and to gain some indication of the costs it may have entailed, this section focuses upon cropping patterns in three provinces. Whereas previous sections proceeded through a sequence of agricultural products, attempting to uncover changes in output and trade patterns for each product individually, this section keeps three products simultaneously in view. This new perspective, although requiring a narrower geographical horizon, yields conclusions that were not apparent in the more comprehensive data sets already discussed. The evidence examined in this section concerns Yunnan, Guizhou, and Guangxi, which form a contiguous region in southwestern China. The three provinces are similar in area, and they have experienced similar population densities and population growth rates. During the mid-1950s, average annual grain output in each province significantly exceeded the 275-kilogram per capita standard, with output per capita in Guangxi almost identical to that in Guizhou and below that in Yunnan. Over the course of the Maoist era, however, the experience of Guangxi differed conspicuously from those of the other two provinces. During 1979-81, Guizhou ranked last in annual grain output per capita, at 225 kilograms—down 69 kilograms from the level of 1955-57, and far from adequate for local requirements. Output in Yunnan exhibited a similar absolute decrease but from a higher initial level, falling marginally below even the 275-kilogram adequacy standard by 1979-81. On the other hand, output per capita in Guangxi increased between 1955-57 and 1979-81. During the later period, the province ranked in the top half (by grain output per capita) with an output slightly below the national average. 108 The experiences of Yunnan and Guizhou are especially interesting because the inadequacy of their grain supplies cannot be attributed solely to specialization in activities other than grain production. As of the late 1970s, both provinces remained highly agricultural. 109 And, in both cases, the shares of agricultural output contributed by crop farming approached the national average,

73

AGRICULTURE

the shares of grain in sown area exceeded the average, and the shares of industrial crops in sown area were average (in Yunnan) or below average (in Guizhou). While Guangxi also remained highly agricultural, it had a higher share of sown area under industrial crops and a much lower share under grain.110 These observations concerning output and land use suggest that Yunnan and Guizhou concentrated in grain, while Guangxi—which has shown far better performance in grain production—devoted comparatively more of its resources to other activities. Of course, it is possible that such an allocation was optimal or nearly so for the three provinces, particularly if land in Yunnan and Guizhou is simply unsuitable for crops other than grain. The data in table 2.11, however, indicate that this has not been the case." 1 In 1979 Yunnan experienced a higher yield in sugar production than did Guangxi, and both Yunnan and Guizhou experienced higher yields in tobacco. Grain yields were much higher in Guangxi than in Yunnan and Guizhou. Relative Table 2.11

Yields in Yunnan, Guizhou, and Guangxi. 1957 and 1979 Yield Itons per hectare)

and Year

cultivated

sown

tobacco

sugar cane

1 87

0.60

38.09

3.19

2.15

1.63

38.39

Yunnan 1957 1979 Guizhou 1957 1979

2.05

081

28.51

3.77

2.44

1.44

26.66

564

2.86

1.05

1.46

0.77

38.97

4.28

2.78

1.49

42.02

Guangxi 1957 1979

1.44

22.27 29 83

China 1957 1979

SOURCES: PROVINCIAL GRAIN YIELDS, 1957: Walker, Food Grain, p. 239. PROVINCIAL TOBACCO A N D SUGAR CANE YIELDS, 1957: Sun Jingzhi, Xinan diqu jingji dili (Beijing: Kexue, 1960), in JPRS 15069, pp. 375 and 531; and Chen, Chinese Economic Statistics, p. 333. NATIONAL YIELDS, 1957: see tables 2 8 and 2.9 PROVINCIAL A N D NATIONAL YIELDS, 1979: Zhongguo nongye nianjian 1980. pp. 101 and 112.

74

ECONOMIC INTEGRATION

to the other two provinces, then, Guangxi's comparative advantage appears to lie in grain production. The yields for 1957 are consistent with a similar conclusion." 2 Realizing any potential gains from trade associated with this comparative advantage would require that Guangxi move toward greater specialization in grain and that Yunnan and Guizhou move toward greater specialization in the industrial crops. Table 2.12 presents data concerning land use in the three provinces. These data reveal that, relative to Yunnan and Guizhou, Guangxi shifted into tobacco and sugar cane—crops in which it has experienced a comparative disadvantage. Between 1957 and 1979, the area sown to these two crops increased by a total of 50,000 hectares (34 percent) in Yunnan and Guizhou— and by 115,000 hectares (244 percent) in Guangxi. The share of total sown area planted to tobacco and sugar cane in Yunnan and Guizhou increased from 2.1 to 2.7 percent—and, in Guangxi, from 1.1 to 3.2 percent. On the other hand, while the share of grain in the total sown area of Yunnan and Guizhou increased slightly, the share of grain in the sown area of Guangxi decreased. Since the differences in yields among the three provinces are large, the backward specialization reflected in table 2.12 may have imposed significant costs, as compared to alternative development paths involving different patterns of land use and larger volumes of interprovincial trade. Table 2.13 is intended to suggest the possible magnitudes of such costs. The table constructs two alternative allocations of the total area each province actually allocated to grain, tobacco, and sugar cane in 1979. The first hypothetical allocation exploits the comparative advantage of Yunnan in sugar cane, shifting half of Guangxi's cane land back into grain and shifting a portion of Yunnan's grain land into cane. The second hypothetical allocation exploits Guizhou's comparative advantage in tobacco. Before considering the potential output gains suggested by table 2.13, it is necessary to inquire as to whether or not the simulations in the table do represent feasible alternatives to the actual allocation. First, the hypothetical output changes reported in the table rest upon certain assumptions concerning opportunity costs. For example, the first hypothetical reallocation uses a ratio

S

CO S


4 3.3 2.6 2.4-26 5.6 2.5 2.5

SOURCES: CHINA 1916-34: Β R. Mitchell. International Historical Statistics: Africa and Asia. pp. 518 and 520. RUSSIA: B. R Mitchell, European Historical Statistics, p. 622; and Paul R Gregory, "Economic Growth and Structural Change in Czarist Russia and the Soviet Union," pp. 30 and 32 UNITED STATES: U.S. Dept. of Commerce, Bureau of the Census, Historical Statistics. 2:727 and 737; and Ernest W Williams, Jr., Freight Transportation, p. 18 INDIA: Gov of India, Ministry of Planning, Statistical Abstract: Τ978, ρ 404; and Gov. of India, Planning Commission, National Transport Policy, pp. 17-18 and 140 CHINA 1957-81: table 4.3. USSR: Gregory, "Economic Growth and Structural Change," ρ 39; Central Statistical Board, The USSR in Figures for 1980, pp. 132-33; Williams, Freight Transportation, pp. 14 and 185; and CMEA, Statistical Yearbook, pp. 262-63 BRAZIL: UN, Statistical Yearbook 1966, p. 425; UN, 1979/80 Statistical Yearbook, p. 555; and World Bank, World Development Report 1980, ρ 113. NOTE: Entries are arranged roughly in ascending order by GNP growth rate. ' Comparison of end years only. 6 Factor by which turnover increases as GNP doubles, at the following annual rates of growth for GNP. in percent: Russia 3.3 (NNP), U.S. 3 3. India 3.6. China 4 4-4.9, USSR 5.1 and 4 6 |NNP, 1937 and 1950 prices). Brazil 7.0 (GDP). c Thirteen railroads " Intercity rail, inland waterways, coastwise and intercoastal shipping, and pipeline. • Rail and road only. ' Rail, motor vehicle, coastal and inland shipping in powered vessels, and pipeline g Rail, inland waterways, domestic maritime, and pipeline 11 Rail, river, motor vehicle, and pipeline.

a single country (as in table 4.3). Of course, table 4.4 is based upon a small sample; however, there is no reason to suspect that the countries included are not representative. Indeed, a World Bank study reports that "the relationship of freight growth to G N P growth [in China] is less than that experienced by other countries in similar phases of development.'" 3 A second approach to evaluating transportation output

141

TRANSPORTATION

uses two measures of value added: transportation's contribution to national income and national income itself. The share of transportation in China's net material product fell from 4.3 percent in 1957 to 2.9 percent in 1981, suggesting that transportation has not kept pace with aggregate output. Table 4.5 presents the shares of net material product contributed by the transportation sectors in eight socialist countries for selected years during the period 1960-1977. 14 The shares of transportation in India's net domestic product are also included, although they are not strictly comparable to those based upon the national income accounts of the socialist countries. In India, in the Soviet Union, and in all other countries in this sample with the exception of East Germany, the transport shares were larger in 1977 than in 1960. Again, growth of transportation output in China seems to have been relatively slow by comparison with other countries. This comparison is subject to problems concerning valuation; again, however, there is no reason to suspect systematic bias across countries. The third method of evaluating transportation output in

Table 4.5 Contribution

of Transportation Sector to Net Material Product, Selected Countries Share (percent)

Country

1955

1960

China

4.3·

4.1"

1970

1977 3.9·

Bulgaria

4.2

69

8.7

Hungary

5.6

6.2

5.9

East Germany

5.4

5.0

5.0

Mongolia

91

75

10.6

Poland

5.3

6.7

7.7

Romania

5.2

5.8

5.6

USSR

5.4

5.6

6.7

Czechoslovakia

3.0

3.8

33

3.8

4.6

5.3

India"

34

SOURCES: CHINA: S S 8 . Statistical Yearbook 1981, p. 20 INDIA: Gov of India, Statistical Abstract 1978, p. 406. ALL OTHERS: C M E A , Statistical Yearbook, pp. 4 1 - 4 2 . NOTE: All data pertain to "transport and communications." ' 1957. ' 1962. c

1981: 2.9 percent.

' Net domestic product at factor cost.

142

ECONOMIC INTEGRATION

China compares the growth of freight volume, in tons, with that of production, also in tons. This sort of comparison is feasible because several fairly homogeneous commodity groups, primarily fuels and raw materials, account for a large portion of total freight volume (especially when purely local traffic is excluded). In the case of waterborne freight, for example, coal alone accounted for about 32 percent, and oil for 29 percent, of reported volume on the Yangzi River as of 1981 ; coal and oil account for about half of all water transport under the Ministry of Communications. 15 In the case of railroads, the commodity composition of freight traffic is known in some detail for both the 1950s and the late 1970s (table 4.6). In view of the predominance of railroads in China's transportation, commodity-specific comparisons of rail volume index with the corresponding output index constitute a meaningful test of whether or not transportation has generally kept pace with production. 16 Table 4.7 compares the growth of transport volume with the growth of production for each of six commodity groups. 17 These commodity groups accounted for about three-fourths of Table 4.6

Rail Freight Volume in China, by Commodity Volume (million

tons)

Commodity

1956

1957

1970

1978

1979

Coal and coke Petroleum

82.5

101.6

263.5

416.8

427.3

3.5 101

4.0

37.0

10.2

30.6 40.7

61.2 58.9 64.9

59.3

11.1 60.3

101.8

189.6

61.8 188.6

12.9 28.7

19.6

21 9

38.0

39.6 28.4

Iron and steel Metallic ores Mineral building materials: cement Timber Grain TOTAL

8.9 60.6 5.7

6.2

17.6 17.3

19.1 17.9

246.0

274.2

20.8 6655

24.6 1074.9

63.9

1095.0

SOURCES: 1956 and 1957 (except building materials): A. I. H'yin and M. P. Voronichev, Zheleznodorozhnyy Transport Kitayskoy Narodnoy Respubliki (Moscow: Railroad Transport Publishing House, 1959), in JPRS 3484, pp. 7 2 - 7 3 : BUILDING MATERIALS: SSB, Statistica! Yearbook 1981 p. 287; 3nd Xue. Almanac 1981. p. 584. 1970, 1978, and 1979: World Bank, China. 2:345; a slightly different figure for cement, 1979, is given in Xue, Almanac 1981, p. 584. NOTES: All data pertain to central railroads. Figures for building materials in 1956 and 1957 are estimates, based upon average daily carloadings for building materials and average carloads of 39 3 and 39 6 tons Average carloads are based upon those for coal in 1956 and 1957; in 1979 and 1980, carloads of building materials were less than 1.5 percent smaller (by weight) than those of coal.

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144

ECONOMIC INTEGRATION

rail freight volume during both 1956-57 and 1978-79. A total o f eighteen sets o f indexes are included: for each o f three combinations o f initial and terminal years and for each of the commodity groups, a transport index is paired with a production index (or, in the case o f iron and steel, several production indexes). In each of the eighteen sets (with the single exception of timber, 195779), the production index for 1978 or 1979 is larger than the transportation index. Furthermore, in most cases similar results obtain for two subperiods—from 1956-57 to 1970 and from 1970 to 1978-79. 1 8 The results for grain, petroleum, and coal merit further discussion. The growth o f grain transport at almost the same rate as grain output seems unexpected, since both the purchased share o f grain and the volume of interprovincial transfers decreased between the mid-1950s and late 1970s (chapter 2). The apparent discrepancy between the transportation-production comparison and earlier results is probably attributable to three factors. First, interprovincial grain flows may have shifted from water to rail. In the 1970s, waterways accounted for about 31 percent of grain transport; it is likely that this share is smaller than that for the 1950s. 1 9 Due to changes in the location of grain deficits and surpluses and to the development of the railroad network, most of the areas with relatively large deficits or potential surpluses were more accessible by rail than by water by the 1970s. In particular, during the 1950s, Sichuan and Jiangsu—both on the Y a n g z i — had been among the largest grain traders. Second, the growth of grain imports over the course of the Maoist era introduces a bias into the comparison, since the supply of grain potentially available for shipment increased more rapidly than did domestic output. Third, it is possible that the share of rail volume moving intraprovincially increased between the 1950s and the late 1970s, especially if imported grain was consumed largely in coastal cities and was moved into these cities by rail. Whatever its causes, the grain result in table 4.7, in conjunction with the firm conclusions of chapter 2, suggests that the transportation-production comparison is biased against the fragmentation hypothesis as applied at the provincial level. If a similar bias affects the other com-

TRANSPORTATION

145

modity-specific comparisons in the table, any support they provide for the hypothesis can be accepted with considerable confidence. The comparison for petroleum is of less evidential value than the others in table 4.7, due to the low petroleum output rate during the base period. In 1956 total output of crude oil was only about 1.2 million tons, 55 percent of which originated from a single field in western China. 2 0 Since the 1950s, new fields located closer to the industrial centers of eastern China have been exploited; the probable effects of this development upon comparisons involving reported transport volumes are not clear. Unfortunately, deficiencies in the transport data themselves preclude shifting to a more recent base period. 2 1 In the case of coal, the transport constraints in Shanxi (widely noted in recent reports) must be taken into consideration, given the importance of the province in coal production. 2 2 In 1979 Shanxi accounted for 17.2 percent of total output and, in 1981, for 21.3 percent of output and almost one-fourth of the coal volume originated on China's railroads. 2 3 The coal result in table 4.7, however, is not entirely attributable to recent transport bottlenecks in Shanxi; nationwide, coal transport grew slightly less rapidly than production even before 1970. The commodity-specific results indicate that transportation volume generally did not keep pace with production in China between the mid-1950s and the late 1970s. This test is imperfect, however, due to the partial (though substantial) coverage of the transport indexes and possible mismatches between the commodity categories for transport and those for production. Furthermore, measures of transport volume are susceptible to reporting and aggregation errors, and measures of output fail to take into account any additional supplies made available from imports or stockpiles. In view of these potential problems, the significance of the specific comparisons made in the case of China can be better evaluated by examining similar comparisons for other large countries.

146

ECONOMIC INTEGRATION

Tables 4.8 through 4.10 present four such comparisons using the same commodity categories and methods of construction as in table 4.7, the Chinese case. Tables 4.8 through 4.10 include nineteen sets of indexes for three large countries at various stages of development. 2 4 At least two sets of indexes (one set for each of two countries) are included for each of the six commodity groups. In seven comparisons involving fuels, the indexes for transportation are consistently larger than those for production. In six comparisons involving products of farms and forests, the indexes for transportation are consistently at least as large as those for production. Only in the case of iron and steel does transport volume generally lag production. These results suggest that the Chinese case is exceptional: transportation in China has not generally kept pace with production, as it has elsewhere. Of course, this comment is based Table 4.8

Indexes of Pipeline and Rail freight Volume, and of Production, in the Soviet Union 1940 (1913=

Commodity 1. Coal a. hard coal b. coke 2

Petroleum

production 5.0 4.8 3.4

1.01 transport 5.8

1975 (1940= production 4.2

6.1

15.8

5.3 35

b. crude steel

43

6.9 77

36

8.8

5. Timber a. industrial timber b. sawn wood 6. Grain a. cereals and pulses b wheat, rye. barley, oats, maize

transport 4.9

38

3. Iron and steel a. pig iron c. rolled steel d. rolled steel products 4. Mineral building materials a. cement

1.0)

23.6 8.4

8.7 85 37

21.0 3.5

3.8 2.7

1.6

3.3

2.5 2.4

26 1.5 1.5

SOURCES TRANSPORT: Williams, Freight Transportation, ρ 172; Central Statistical Board, Figures 1980. p. 134; Tsentral'noe Statisticheskoe Upravlenie, Narodnoe Khoziaistvo SSSR ν 1960g, p. 537; and Tsentral'noe Statisticheskoe Upravlenie, Narodnoe Khoziastvo SSSR ν 1978g. p. 301 OUTPUT. G Warren Nutter, The Growth of Industrial Production in the Soviet Union, pp. 4 2 0 - 2 2 and 4 2 7 - 2 8 ; CMEA, Statistical Yearbook pp. 78, 102, and 1 9 0 - 9 1 ; Mitchell, European Historical Statistics, pp. 277, 288, 294, 385, 3 9 4 - 9 5 , 4 1 5 - 1 7 , and 4 2 2 - 2 3 ; and Central Statistical Board, Figures 1980. pp. 100, 104, and 108. NOTE: All production and transport data in tons, except timber and sawn wood production, in cubic meters

TRANSPORTATION

147

T a b l e 4 . 9 Indexes of Pipeline and Rail Freight Volume, and of Production, in the United States 1955 11940= 1.0) Commodity 1 Coal a. bituminous and Pennsylvania anthracite b. coke 2 Petroleum a. crude oil b. refined products 3 Iron and steel a. raw steel b rolled iron and steel 4. Mineral building materials 5 Forest products a forest product raw materials b. industrial timber c. lumber 6. Grain a. corn, wheat, oats, barley, rice, rye, sorghum, buckwheat

production 0.9 10 13

transport 1.1

2.2a 1.8 2.2 1.5 17 1.9 25

2.6 1.4

1.1 13 1.2 1.5 1.3"

SOURCES: TRANSPORT: U.S. Dept. of Commerce. Bureau of the Census, Historical Statistics, 2:722 and 732-33, and Williams. Freight Transportation, pp. 82 and 84. OUTPUT: U. S. Dept. of Commerce, Historical Statistics. 1 510-16, 538-39, 541, 585, 589-93, 596, and 2:693. NOTE: All production and transport data in tons, except petroleum production in barrels, forest product raw materials in 1976 dollars, industrial timber in cubic feet (roundwood equivalent), and lumber in boardfeet. a Pipeline volume data converted at 306 pounds per barrel. " Aggregated using the following conversion factors (in pounds per bushel): corn 56, wheat 60. oats 32, barley 48, rye 56, all others 40.

T a b l e 4 . 1 0 Indexes of Pipeline and Rail Freight Volume, and of Production, in India 1978 11961 = 1.0) Commodity 1. Coal 2. Petroleum 3. Iron and steel a. crude steel 4. Mineral building materials a. cement 5. Timber 6. Grain

production 1.8 21.9*

transport 2.2 2.4

2.5 2.4 1.4" 1.5

2.1 1.5

SOURCES: TRANSPORT: Government of India. National Transport Policy, pp. 147-48. OUTPUT: Government of India, Statistical Abstract 1978, pp. 51 and 69; United Nations, Yearbook 1966, pp. 180, 201, 297, and 300; and United Nations, 1979/80 Statistical Yearbook, pp. 196, 201, 341, and 345. NOTE: All production and transport data in tons, except timber production, in cubic meters. ' Includes shale oil. 0 1975.

148

ECONOMIC INTEGRATION

upon a small sample; however, the international comparison is biased against the fragmentation hypothesis, in that the shift from railroad to motor vehicle has been less significant in China than in the other countries. The three methods of evaluating transportation output presented in this section suggest that a comparison of G N P and transport indexes (as in table 4.3) can be misleading. In fact, the growth of transportation output has been slow in China since the 1950s—by comparison with the growth of transportation output elsewhere, by comparison with production in value-added terms throughout, and by comparison with production in volume terms throughout. During the Maoist era, China appears to have pursued a development path conducive to local self-sufficiency and inimical to cooperation among economic units. Of course, self-sufficiency has not been absolute, but the tendency in this direction has been sufficiently pronounced to leave a distinctive imprint upon indicators of transport performance. Interestingly, this tendency does not appear to have characterized development in China during the 1950s. From 1950 to 1956-57, rail transport volumes increased more rapidly than production for four of the six commodity groups in table 4.7, the exceptions being iron and steel and timber; the share of transportation in national income (table 4.5) was the same in 1952 as in 1957; and the growth factors for modern domestic turnover and rail turnover (table 4.4) were substantially higher for 1952-57 than for 1957-81.

C. Transportation Networks and Equipment The lagging growth of transportation output is broadly consistent with evidence concerning production patterns, examined in earlier chapters, and lends additional support to the fragSections C and D are adapted from Thomas P. Lyons. "Transportation in Chinese Development, 1952- 19S2,"Journal of Developing Areas. 19:305-327. Γ"- c o l o r-- c o o o i n- .CÒ • N m o ' í r v i n ^ n a o o

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152

ECONOMIC INTEGRATION

transportation in China during the Maoist era, accounting for three-fourths of modern domestic freight turnover. Inland waterways handled a substantial share of east-west traffic, especially in central and southern China. (Rivers in the northern and northeastern regions are less suited to navigation, due to silting, frequent periods of low water, and freezing.) Shipping along the coast and, to a lesser extent, along portions of the Grand Canal supplemented north-south rail traffic. Motor vessels on all inland waterways and on coastal routes accounted for roughly one-sixth of freight turnover. Highways have been a principal means of long-distance transport in the Far West, but elsewhere in China highway transport has remained generally short-haul, handling local movements and deliveries to or from railroads and waterways. Pipelines, concentrated largely in the Northeast and in several coastal provinces, were moving most of China's crude oil by the late 1970s, with refined products still moving primarily by rail. 28 Railroads. Columns 2 and 3 of table 4.11 indicate that the route length of China's central railroad network increased at an average annual rate of almost 3 percent between the early 1950s and late 1970s, with an average annual increment of almost 1,000 kilometers. The growth rate of track length was somewhat higher. Extension of rail routes accounted for over twothirds of the addition to total track length during 1953-57 (inclusive), for about one-half during both 1958-65 and 1966-75, and for somewhat over one-third during 1976-81. By 1981 about 9,000 kilometers of rail routes (17 percent) had been double-tracked. 29 Almost all routes had been converted to standard gauge, and the quality of the entire network had been improved to permit high traffic densities. 30 In addition to the centrally operated railroad network, about 4,000 kilometers of local railroads were built during 1953-73. In 1981 over 3,700 kilometers were in use, but they accounted for only about 0.2 percent of total rail freight turnover. Until 1984 locally operated railroads were limited to lines of no more than thirty kilometers. 31

TRANSPORTATION

153

T a b l e 4 . 1 2 Inventories of Locomotives. Freight Cars, and Motor Vehicles in China. 1949-1981 Motor

Vehicles

Ithousands)

Year

Locomotives

Freight Cars

total.

1thousandsj

(thousands)

civilian

total

13)

14)

15)

(46]

51

(2)

(1)

~A'

1949

trucks only civilian IB) -32

1952

(3 3)

(58)

1957

(3 7Γ

|86r

d

1960

(5.6)"

(132)

d

(154)

1965

(5.3)

(143)

1970

(6.5)

(175)

(500)

am (434)

1975

(8.6)

237

1979

101

259

1556

(1445)

1144

1980

(10.6)'

(264)

1783

(1664)

1299

1970

(1796)

1434

1981

(42) (63) (75)

(914)

SOURCES: COLUMN 2: 1949, World Bank. China, 2:305; 1952-57, U.S. CIA. "China: Economic Indicators." p. 35: 1960-75 and 1980, U S CIA, Directorate of Intelligence. Handbook of Economic Statistics

1982, p.

211, 1979, Peterson, "Transportation," ρ 144. COLUMN 3: 1949, Ma. Jingji shidian. ρ 253; 1952-57, U S CIA. "China," p. 35; 1960-70, U.S. CIA, Handbook

1982, ρ 212; 1975. World Bank. China, 1:391; 1979-80, World Bank, China, 2:343-44

COLUMN 4: 1949, Wang and Gao, "Yunshuye." p. 388, and Ma. Jingji shidian, p. 265; 1970, International Road Transport Union, World Transport, p. 155; 1979-80, Zhongguo baike nianjian 1981, p. 311; 1981, Zhongguo baike nianjian 1982, p. 405. COLUMN 5: 1952-57, U.S. CIA, "China," p. 35; 1960-81, U.S. CIA, Handbook 1982, p. 213. COLUMN 6: 1949, Wang and Gao, "Yunshuye," p. 383 (not consistent with 1949 figure in column 4): 1960, estimated from figure in column 5 and report that in 1961 there were 90,000 vehicles for military use, in Philip W. Vetterling and James J. Wagy, "China: The Transportation Sector. 1950-71," p. 173; 1979-80, Zhongguo baike nianjian 1981, ρ 311; 1981, Zhongguo baike nianjian 1982, p. 405. NOTE: Figures in parentheses are estimates All others are taken from Chinese reports or calculated from data therein. Chinese sources do not report inventories of military vehicles. "Another source gives 3,355 locomotives (of which 1,023 damaged]; see Wu Yuan-Li, The Spatial Economy of Communist China, p. 112. ' The locomotive inventory reportedly increased by over 500 units from 1952 to 1957 and by 50 percent from 1957 to 1960; Wang and Gao, "Yunshuye." pp. 392-93. 1

The freight car inventory reportedly increased by over 30,000 units from 1952 to 1957; Wang and Gao,

"Yunshuye," ρ 392 a

The motor vehicle inventory reportedly increased by 60 percent from 1952 to 1957 and by 63 percent

from 1957 to 1960; Wang and Gao, "Yunshuye," pp. 392-93. "Another source places the number of trucks at 2 5 0 - 300 thousand; Munthe-Kaas, "Roads and Rails," ρ 326. 1

The 1980 inventory was reportedly 2 52 times that of 1949; Ma, Jingji shidian, ρ 246

154

ECONOMIC INTEGRATION

Tables 4.13 and 4.14 present evidence concerning the time path and regional distribution of central railroad-route development. The annual increment to route length moved narrowly around the long-term mean during 1953-56, then completed four cycles between 1957 and the early 1980s (table 4.13). Between 1952 and 1979, construction of new routes was concentrated in western China, with the Southwest and Northwest accounting for about 40 percent of the total increment (table 4.14). On the other hand, the East (where freight traffic densities are extremely high) accounted for only about 12 percent. Roads. The data in columns 5 through 7 of table 4.11 apparently pertain to nonurban roads suitable for motor traffic and under the jurisdiction of national, provincial, and local authorities down through the commune level. 32 China's road network has grown at an average annual rate of over 7 percent between the early 1950s and late 1970s, with an average annual increment of about 27,000 kilometers (column 5). Road-building has exhibited cycles broadly similar to those observed in the extension of rail routes. Official statistics of questionable accuracy place the total increment for 1956-59 (inclusive) at 341,000 kilometers and that for 1960-64 at - 29,000 kilometers. 3 3 From 1965 through 1978, the annual increment typically fell between 20,000 and 40,000 kilometers, the principal exception being a period of slow growth at the height of the Cultural Revolution in 1967-68. Distribution of motor roads by region, for both 1952 and 1979, is shown in table 4.14. The South-Central and Southwestern regions together accounted for about 48 percent of the total increment between 1952 and 1979. In 1979 the entire network of 875,800 kilometers included seventy national trunk highways of 110,000 kilometers and interprovincial and provincial highways of over 130,000 kilometers. 3 4 These highways, however, did not yet constitute an integrated system suitable for long-distance freight traffic. Some roads, for example, ended at provincial boundaries due to lack of interjurisdictional coordination. 3 5

TRANSPORTATION

155

T a b l e 4 . 1 3 Annual Increments to Railroad Routes in China, 1953-1982 Approximate Range of Annual Increments 1kilometers1 700-1,100

Approximate Average Annual Increment 1kilometers) 900 200 2,400 350 1,250 500 1,530 600 1,170 230

Period 1953-56 1957 1958-60 1961-64 1965-66 1967-69 1970-72 1973-76 1977-79 1980-82

1,600-3,500 100-600 1,100-1.400 200-800 1,100-1,800 300-900 1,100-1,200 100-300

SOURCE: SSB, Statistical Yearbook 1983. ρ 299 NOTE: Original data correct to nearest 100 kilometers, data pertain to central railroads only (road operated)

T a b l e 4 . 1 4 Distribution of Transport Networks by Region, 1952 and 1979 Share of Total Length

Railroad? Region' North Northeast East South-Central Southwest Northwest

1952 21 5 39.3 16.1 17.6 3.5 20

Motor Roads 1979 21.1 23.3 14.1 16.6 11.5 13.4

1952 11.4 21.6 20.6 20.5 132 12.7

1979 12.9 10.9 18.3 26.0 196 12.3

(percent) Inland Waterways5 1952 4.0 7.9 34.0 36.4 103 3.5

1979 1.1 56 488 322 93 0.8

SOURCE: Wang and Gao, "Yunshuye," p. 385. a For definitions of regions, see table A.I. b Railroad data pertain to central railroads only; 1952, road operated: 1979, road owned. By the early 1960s, all provinces except Xizang were interconnected by central rail routes. c Inland waterway data do not include the main course of the Yangzi under central control (3,786 kilometers in 1952 and 2,407 in 1979).

156

ECONOMIC INTEGRATION

Columns 6 and 7 in table 4.11 are intended to provide some indication of road quality. The value of a road is clearly reduced if it frequently becomes impassable. Furthermore, roads of poor quality require constant maintenance and impose high vehicle operating costs. Traffic moves 30 percent faster on residual oil roads than on gravel, fuel consumption is 20 percent lower, and repair costs are reduced. 3 6 Since a substantial portion of labor time in China is devoted to transport work, improvements that permit greater speeds and larger loads release significant amounts of labor, as well as fuels and materials. Quality was not a major concern in Chinese road building until quite recently. At least through the 1960s, most roads in China (except perhaps those of military importance) were simple dirt roads built at the direction of county and commune authorities. According to Chinese reports of the early 1960s, most such roads were not fit for motor traffic, and one-half of the entire network became impassable on rainy days. 37 As late as 1970, blacktop roads were rare, and less than half of China's roads had been surfaced at all (mostly with gravel). 38 Of nearly 890,000 kilometers open to traffic in 1980, roads totaling 610,000 kilometers were described as "all-weather," although many in fact were not up to all-weather standards. 3 9 About 157,000 kilometers were surfaced with asphalt, oil, or concrete, and about 500,000 with macadam, packed sand, or gravel; most pavements were irregular and rough. 40 About one-fourth of the entire network was unimproved dirt. In Anhui province for example, of about 24,000 kilometers reported, 10,450 kilometers were arterial highways but only 6,268 kilometers were blacktopped. The highway between the provincial capital and the province's largest port was still a dirt road. 41 Geometric standards for motor roads were promulgated by the Ministry of Communications in 1972. As of 1980, 41 percent of China's roads did not meet even the lowest standards set for rural roads—and modern highways (Class 1 roads) were still virtually nonexistent. 4 2 Average truck speeds of less than 30 kilometers per hour are attributable in part to rough surfaces and low geometric stand-

TRANSPORTATION

157

ards. They also reflect delays caused by slow-moving tractors and animal carts, by rural markets that spill over onto roadways, and by peasants' use of road surfaces for drying grain.43 Waterways. As column 8 in table 4.11 indicates, China's navigable inland waterways totaled about 108,500 kilometers in 1980— 81, substantially below the totals for the mid-1950s. In fact, a peak of 172,000 kilometers was reported in 1961, implying an average annual growth rate of - 2 . 3 percent between 1960-61 and 1980-81. This decrease has been attributed to the haphazard construction of dams by various local authorities. 44 The average haul by motor vessels on inland waterways fell from 385 kilometers in 1955 to only 170 in 1979, reflecting this fragmentation of the network. 45 The distribution of inland waterways by region, for both 1952 and 1979, is given in table 4.14. The Yangzi and its tributaries account for about 65 percent of the entire network. 46 In 1979 they accounted for about 72 percent of the total freight volume on China's inland waterways, probably a substantially larger share than that for 1957.47 In 1981 inland ports numbered about 2,000, of which 300 were "fairly large." 48 Twenty-five ports, all on the Yangzi, have been controlled by the central government through its Yangzi River Navigation Bureau; all of the others have been controlled by local governments. Modernization of inland waterways has concentrated on the Yangzi. Locally controlled ports have generally remained backward (and in some cases completely unimproved), and channels other than those on major rivers poorly maintained and marked. Few new canals have been built to connect natural waterways; the Grand Canal, however, has been renovated. By 1980 the Grand Canal was navigable for 1,044 kilometers and accounted for about 13 percent of the total freight volume on China's inland waterways. 49 China's coastline totals about 18,000 kilometers. There are fifty-eight "fairly large" ports; fifteen have been controlled by the central government, and seven have accounted for about two-thirds of the total commerce (in tons) moved through China's

158

ECONOMIC INTEGRATION

ocean ports in recent years. 50 Development of ocean ports was not stressed before 1972.51 In 1979 the fifteen ports under central control had 313 berths, of which 133 were suitable for 10,000 ton vessels; the corresponding figures for 1949 are 119 and 61,52 Much of this increase occurred between 1972 and 1980, as cargo handling capacity increased from 120 to 217 million tons per year, spurred by the growth of foreign trade. 53 As in the case of inland ports and waterways, the many smaller coastal ports controlled by local governments have probably received less attention than those few under central control. Pipelines. Column 10 of table 4.11 contains recent data pertaining to pipelines for petroleum and natural gas.The first oil pipelines in China were constructed during the late 1950s and early 1960s, with rapid growth occurring during the 1970s. The first slurry pipeline was built in 1960. By late 1980 crude oil lines totaled over 6,790 kilometers, oil product lines over 1,500 kilometers, and natural gas lines over 1,650 kilometers; a few short slurry lines moved iron ore, copper ore, sulphur ore, and tailings.54 Locomotives and freight cars. Columns 1 and 2 of table 4.12 present data pertaining to inventories of railroad equipment. From very low initial levels, the average annual growth rates of locomotive and freight car inventories were 5-6 percent between 1952 and 1979 (without adjustment for increasing size and improving quality). The locomotive inventory has included mainly steam engines of Chinese manufacture, with some Soviet and American prewar models. In 1980 diesels accounted for about 21 percent of the total inventory and electric locomotives for only 3 percent. The predominant use of steam is thought to be an important limitation in railway operations, because steam locomotives are inefficient and pose severe capacity and distance constraints in mountainous and arid areas. The freight car inventory has included mainly general-purpose box cars and gondolas having capacities of fifty tons or more, with few special-purpose units (especially refrigerated cars).55 Motor vehicles. China's inventory of motor vehicles grew fairly slowly before 1970, as shown in columns 4 through 6 of table

TRANSPORTATION

159

4.12. On average, less than 25,000 trucks were added annually during 1952-1970 (column 5). After 1970 the average annual increment was over 120,000 units. By the end of 1980, China's inventory of civilian motor vehicles numbered almost 1.8 million (column 4), of which 1.3 million were trucks and 110,000, buses. 56 Most of China's vehicles are of Chinese manufacture; most of the trucks are gasoline-powered, 4-ton models, based upon outmoded Soviet designs. Motor vehicles are used for about twenty years, on average. Historically, about two-thirds of the motor vehicles on hand have been operational, although this has increased to about five-sixths with the rapid acquisition of new vehicles in recent years. 57 Tractors, power tillers, animal carts, and bicycles were being widely used for freight transportation throughout the Maoist era. Motor vessels. Table 4.12 does not include inventories of motor vessels on China's inland and coastal waters because these data are not readily available. Fragmentary evidence indicates that China's modern fleet grew rapidly between the early 1950s and the early 1980s. The coastal fleet totaled perhaps 2 million deadweight tons by 1980, over twenty times the 1950 figure.58 Most of this capacity was controlled by the central government, through its two coastal shipping bureaus. Within the jurisdiction of the Yangzi River Navigation Bureau, there were 333 vessels (totalling 138,000 dwt.) in 1949 and about 2,000 vessels (1.7 million dwt.) in 1979.59 Recent Chinese reports, however, emphasize the underdeveloped state of water transportation and imply relatively slow growth of modern carrying capacity between 1957 and the early 1970s. 60

D. Transport Development: A Comparative Perspective The data surveyed in section 4.C clearly reveal great improvement in China's transportation system over the course of the Maoist era. Transport development proceeded from a very low base, however, and the rate of development varied across regions and modes—as did the quality of the networks and equipment

160

ECONOMIC INTEGRATION

accumulated. This section comments briefly on the significance of the evidence concerning transport development, with the specific objective of examining the extent to which development reduced transport costs and facilitated exploitation of the economies associated with specialization and trade. As in the case of transportation performance, China's experience will be compared with those of other countries. Whether or not the growth of transport capacity in China has been spectacular, as some observers suggest, can be ascertained only through such comparisons. Tables 4.15 and 4.16 permit comparison of China's transportation networks and equipment inventories as of 1979 with those of other large countries and regions at various stages of economic development. Table 4.15 reveals that the geographical densities of China's networks are generally quite low—with the exception of inland waterways. The relatively high density of China's waterway network is attributable primarily to favorable natural endowment rather than to past development efforts. 61 Otherwise, only the railroad density for Brazil falls below the corresponding figure for China. Table 4.16 yields similar results for equipment inventories (on a per capita basis). China clearly has not yet approached the levels of transportation development observed in other large countries. Because initial levels of development (as of the mid-1950s) differ, however, it is more appropriate to examine China's experience relative to historical standards. Railroads again provide the best basis for historical comparisons, because the necessary evidence is both readily available and reasonably consistent in definition across countries. Such comparisons are meaningful in evaluating China's experience, given the predominance of railroads in China's transportation system and their importance in the modernization process elsewhere. Figure 4.1 indicates that China's central railroad network has grown slowly since 1952 by comparison with growth from similar initial levels in other large countries and regions. Even during a five-year period of slow growth (1861-65), the United States added almost as large an increment to its rail

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0. or fG( ) = where β, > 0. β2 > 0. β, + β2 = 1. Of course, multiple outputs require aggregation in the numerator of the productivity measure as well. 2.2. A productivity index is a ratio of two productivities (calculated using the same formula). For example, consider the two-input production unit in two successive periods, t and t + 1. The productivity indexes for period t + 1 relative to period t corresponding to the aggregation formulas fA and fc are

The growth rate of productivity is then 100(At+1 - 1) percent, or 100(G,+ 1 - 1) percent, per period (between periods t and t + 1).

2.3.Depending upon the technology of the unit under consideration, total productivity may differ from period to

302

APPENDIXES

period 9 (i.e., the productivity index may differ from 1.0) for one or more reasons. 1. 2. 3. 4.

Production possibilities differ. The production unit is not as efficient in one period as in the other. The unit operates at different output levels. The unit employs different input combinations.

Measured factor productivity increases are generally attributed in great part to (1) technological change (the addition of new production possibilities through advances in knowledge), (2) increased efficiency in production, and (3) exploitation of economies of scale as output increases. 1 0 In the case of partial productivities, measured increases can result from the use of larger quantities of the inputs not included in the index. In all cases measured productivity increases may also be due to measurement errors related to the quantification of individual inputs and outputs and to their aggregation. For example, a longer work week may show u p as increased productivity if labor is measured in man-years; in some instances, this may be viewed as a spurious result that should be prevented by changing the units in which labor is measured. On the other hand, the intensity with which a man-hour of labor is performed is perhaps appropriately viewed as affecting productivity through efficiency. Many such conceptual and technical issues arise in the construction of productivity indexes due to the multiplicity of factors that can influence the observed outputs of a production u n i t . "

3. Dynamic Efficiency and Increases in Productivity 3.1. Dynamic efficiency is " t h e capacity for self-improvement through enlargement of technological possibilities and their effective utilization in the course of time." 1 2 3.2.The capacity to enlarge technological knowledge suggests that the production possibilities of future periods—and not simply f u t u r e input availabilities—may depend upon current

C. EFFICIENCY AND PRODUCTIVITY

303

productive activities. The notion of intertemporal productive efficiency can be generalized, recognizing that future production possibilities are not given irrespective of current choices but are conditional upon the actual input-output bundle in the current period. Single-period concepts must be used with caution due to the presence of intertemporal linkages not entirely captured in commodity stocks carried from one period to the next. 3.3. The second aspect of dynamic efficiency, the capacity to more effectively utilize technological possibilities, involves single-period productive efficiency rather than changes in the production possibilities themselves. For example, on the convention of subsection 1.2, learning-by-doing and the accumulation of managerial expertise can yield productivity increases through improved single-period efficiency within a fixed PPF.

NOTES, BIBLIOGRAPHY, AND INDEX

Notes INTRODUCTION 1. Sherman Robinson, " T h e o r i e s , " pp. 58-61. 2. E.g., Stuart Bruchey, The Roots of American 155; Douglas C. North, The Economic 10; and Guy Hunter, Modernizing

Growth, pp. 91 and

Economic

Growth of the United States 1790-1860, pp. 9 -

Peasant Societies,

pp. 42 and 52.

3. Robert F. Dernberger, " T h e Chinese Search for the Path of Self-Sustained Growth in the I980's: An Assessment," p. 35. See also Alexander Eckstein, " T h e Chinese Development M o d e l " ; and Jack Gray, " T h e Chinese M o d e l . " The principle of selfsufficiency in the case of China contrasts strikingly with " t h e curse of self-sufficiency" in the case of the southern United States; see William H. Parker, " S l a v e r y and Southern Economic D e v e l o p m e n t , " p. 117. 4. Audrey Donnithorne, "China's Cellular E c o n o m y , " p. 605. 5. World Bank. China 2:314. 6. William L . Parish and Martin King Whyte, Village and Family in porary

Contem-

China, p. 302. 7. E.g., H e Zhukang, " G u a n y u g o n g y e fazhan sudude ruogan wenti de tantao,"

p. 76. 8. Nicholas R. Lardy, "Central-Provincial Fiscal Relations," p. 95. 9. William G. Snead, " S e l f - R e l i a n c e , " pp. 303 and 305. 10. E.g., Alan P. L . Liu, Communications munist

China,

and National

Integration

in Com-

pp. 174-77; and Victor D. Lippit, " D e v e l o p m e n t of Transportation in

Communist C h i n a . " pp. 675-76.

1. THE CONCEPT OF ECONOMIC INTEGRATION 1. Alfred Marshall, Principles,

p. 241.

2. In other words, the set of agents can be partitioned.

308

1. CONCEPT OF ECONOMIC INTEGRATION 3. E.g., Wassily W . Leontief, The Structure

of the American

1939; Wassily L e o n t i e f et al., Studies in the Structure Hollis B. Chenery and Paul G. Clark, Interindustry

Economy

of the American

Economics.

1919-

Economy:

and

" E c o n o m i c integration"

refers both to a state (the " e x t e n t o f integration") and to a process ("progress toward greater integration"). W h e r e necessary these are distinguished in subsequent remarks. 4. E.g., Bruchey, Roots

of Economic

Growth

p. 155; and Snead, "Self-Reli-

a n c e , " pp. 303 and 305. 5. Concerning economic systems, see chapter 6. 6. These organizational experiments are referred to in Chinese reports as forms of " e c o n o m i c integration" (e.g., Beijing

Review,

11 August 1980, pp. 3-4); to avoid

ambiguities, this usage is avoided in subsequent chapters. 7. Terms used in this section are defined and discussed in appendix C. The discussions in this section and in the appendix emphasize efficiency in production. In particular, the potential welfare gains from trade even without changes in production levels or patterns are not elaborated. 8. Consider the case of t w o economic units and two outputs. A and B. Suppose (1) the production possibilities frontier ( P P F ) of cach unit is concave to the origin; (2) each unit produces both goods, and produces on its P P F ; and (3) at the production points observed in autarky, the slopes of the t w o P P F ' s differ. Then relative costs differ (because the cost in terms of A f o r increased output of Β is given by the slope of the P P F ) . If each unit produces somewhat more o f the good in which it enjoys the lower relative cost, then total output of both goods increases. Both units can be made better o f f , through trade (provided that transport costs do not completely offset the gains from this reallocation). 9. Consider the case of t w o economic units and two outputs, A and B. Suppose (1) the two P P F ' s are identical and convex to the origin; (2) preferences are identical; and (3) in autarky, each unit produces both goods and produces on its P P F . Then if one unit produces only A and the other only B, total output of both goods increases. Both units can be made better o f f , through trade (provided that transport costs do not completely offset the gains f r o m this reallocation). 10. For further comment, see George J. Stigler, "Division o f L a b o r . " 11. Concerning the learning curve, see Nathan Rosenberg, Perspectives Technology,

on

pp. 197-98 and p. 329 n. 25.

12. Concerning the public-good nature of knowledge, see Kenneth J. A r r o w . " E c o n o m i c W e l f a r e , " pp. 614-19. 13. John Stuart Mill, Principles

of Political

Economy,

p. 351.

14. For further comment, see Harvey Leibenstein, " A l l o c a t i v e Efficiency and X - E f f i c i e n c y , " pp. 408-9. 15. Robinson, " T h e o r i e s , " pp. 61-64; and Albert O. Hirschman, Strategy,

pp.

6 and 98-119. 16. Allyn A . Y o u n g , "Increasing Returns," p. 533. 17. Hirschman, Strategy,

p. 27; see also Robinson, " T h e o r i e s , " p. 63.

18. For further comment and examples, see section l . C , below. 19. Transport development and realized gains from interregional trade provide a ready example o f this circularity. 20. Louis Bernard Schmidt. "Internal Commerce and the Development of National Economy Before 1860," p. 819. 21. Some conceivable assignments (e.g., assigning no weight at all to η-1 of the η individual

flows)

will never be selected because all observers judge that they are

unreasonable; most o f the assignments actually chosen are likely to be similar.

1. CONCEPT OF ECONOMIC INTEGRATION

309

22. In some cases, data deficiencies may preclude meaningful synthesis and interpretation. 23.If the initial period and terminal period are separated by one or more intervening periods, the set of relevant matrices may be enlarged. 24. For examples, see North, Economic Growth of the United States, pp. 10121; Albert Fishlow, "Antebellum Interregional Trade Reconsidered," especially p. 360; and Diane Lindstrom, Economic Development in the Philadelphia Region, 1810-1850, pp. 93-119. 25. The evidential value of transport capacity is reflected in Marshall's comments, quoted in section I.A. For further discussion see chapter 4. 26. Robinson, "Theories," p. 59. 27. "Economists understand by the term market, not any particular market place in which things are bought or sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equality easily and quickly"; Cournot, in Marshall, Principles, p. 324. For examples of indicators based upon price movements, see Lance E. Davis, "Investment Market"; Michelle Bürge McAlpin, "Railroads, Prices, and Peasant Rationality: India 1860-1900," pp. 663-66; and Winifred B. Rothenberg, " T h e Market and Massachusetts Farmers, 1750-1855," pp. 295-302. 28. For examples, see Bruchey, Roots of Economic Growth, p. 97; G. William Skinner, "Marketing and Social Structure in Rural China" (part 1), especially p. 40; and Davis Investment Market," pp. 370-73 and 380-87. 29. One might imagine examining the divergence of the true path from an (unobserved) optimal path that emanates from the same initial state, but this is a comparison of little practical relevance. 30. Unless otherwise noted, Ningxia is included in Gansu, Beijing and Tianjin in Hebei, and Shanghai in Jiangsu. In some cases, Tibet is omitted. The provincial data in subsequent chapters therefore pertain to twenty-five " p r o v i n c e s " (or to twenty-four, when Tibet is omitted). For further comment, see appendix A. Delineating economic units along provincial boundaries implies that the number of agents in each unit may change from period to period, because the total number of agents in the economy changes and because some agents are reassigned from one unit to another. 31. Strictly speaking, the services of producer durables, not the durables themselves, should be viewed as inputs in production processes. For convenience, "inputo u t p u t " flows are broadly interpreted to include flows of durables. 32. SSB, Statistical Yearbook 1983, p. 158. 33. SSB, Statistical Yearbook 1983, pp. 158-59; and Li Chengrui, "Shinian neiluan qijian woguo jingji qingkuang fenxi," pp. 23-25. See also Shigeru Ishikawa, "China's Economic Growth," pp. 244 and 246; and Xu Dixin, "Transformation of China's E c o n o m y , " p. 12. The unreliability of data for the Great Leap years is well known; for comments on reports concerning grain output, see K. C. Yeh, "Agricultural Policies and Performance," pp. 511-13. 34. The Maoist era extends from the end of the First Plan period (the end of 1957) through the Third Plenary Session of the Eleventh Central Committee (December 1978). 35. It is difficult to characterize any period of recent Chinese economic history as "typical" or " n o r m a l . " The periods 1955-57 and 1978-81 are both embedded in cyclical upturns, and aggregate output does not appear to have exhibited unusually large deviations from long-run trend during either period.

310

1. CONCEPT OF ECONOMIC INTEGRATION

36. Concerning price formation in China, see Audrey Donnithorne, China's onomic System, pp. 434-56; and Chen Nai-Ruenn, "The Theory of Price Formation in Communist China." 37. E.g., Chen Nai-Ruenn, Chinese Economic Statistics, ρ 39. 38. Vaclav Smil, "A Shortage of Forests," p. 5. 39. Concerning incentives and intentional falsification, see John S. Aird, "The Preliminary Results of China's 1982 Census," pp. 621, 625, and 637. See also S. Lee Travers, "Bias in Chinese Economic Statistics," pp.478-80; and John Philip Emerson, "Urban School-Leavers and Unemployment in China," pp. 2-6. Systematic bias may not be a serious problem if the extent of the bias is more or less constant over time. 40. Stephen George Schmeiser, "Measures of Investment and Production in the People's Republic of China," pp. 1-77. 41. "Anecdotal" evidence is sometimes imprecise, and the representativeness of the cases cited cannot be easily established. Nevertheless, if used carefully, evidence of this sort constitutes an important resource in the case of China. 42. For further comment, see Tjalling C. Koopmans and John Michael Montias. "On the Description and Comparison of Economic Systems," pp. 29-31. 43. The following comments concerning the geography of China are based upon Rhoads Murphey, "Natural Resources and Factor Endowments"; Philip A. True, "Geography"; CHEC, Economy, pp. 70-107; and Cheng Chu-Yuan, China's Economic Development, pp. 1-27. For greater detail, see CHEC, Geography. 44. Seventeen of China's twenty-five provinces are inland. 45. Concerning China's level of development, see Dwight H. Perkins, "Growth and Changing Structure of China's Twentieth-Century Economy," pp. 115-28; and Alexander Eckstein, China's Economic Revolution, pp. 8-30. The labor force share in agriculture and handicrafts is taken from Thomas G. Rawski, Economic Growth and Employment in China, pp. 39 and 146. Chinese output and population data for the 1950s are available in SSB, Statistical Yearbook 1983, pp. 103 and 242-48. Fertilizer output is in terms of nutrient content. The comparison with the United States is based upon U.S. Dept. of Commerce, Bureau of the Census, Historical Statistics, 1:8 and 2:694. 46. See Section 4.C, below. 47. Assessing the overall significance of the changes mentioned in the text requires a systematic investigation similar to that attempted for a later period in subsequent chapters. Concerning distribution of industrial products and acquisition of materials, see Sherman Cochran, Big Business in China, pp. 16-35 and 70-76. Concerning agricultural products, see Ernest P. L. Liang, "Market Accessibility and Agricultural Development in Prewar China"; and Ramon H. Myers, The Chinese Peasant Economy. pp. 184-206. See also G. William Skinner, "Marketing and Social Structure in Rural China" (part 2), pp. 211-28. 48. Concerning the warlord era, see James E. Sheridan, "The Warlord Era: Politics and Militarism Under the Peking Government, 1916-28"; concerning possible economic effects of militarism, see Thomas G. Rawski, "China's Republican Economy: An Introduction," pp. 37-55. Nationalist blockades of areas under Communist control provide ready examples of internal barriers. See Peter Schran, Guerrilla Economy, pp. 168-78; and Zhao Xiaomin, Zhongguo geming genjudi jingji shi, pp. 392-429. 49. While the nature of Communist rule was not beyond the control of China's decision makers during the Maoist era, alternatives that were not conceivably attainable under the existing regime are less relevant to this study.

2. AGRICULTURE

311

50. While the foreign presence in the northeastern and coastal areas influenced the geographical distribution of industrial capacity, it is likely that, even without the foreign presence, modern industrial development would have occurred first in a few coastal cities and spread slowly and unevenly to interior areas. Concerning industrial location and the Chinese Communist view that the inherited pattern was "irrational," see Wu Yuan-Li, The Spatial Economy of Communist China, pp. 6-19.

2. AGRICULTURE 1. E.g., Tang Zongkun, "Jiazhi guilu, shichang jizhi he shehuizhuyi jihua jingji," p. 168: and Chen Jiyuan, "Diqu jingji jiegou," p. 676. 2. For 1957 and 1977, Nicholas R. Lardy, Agriculture, pp. 34-35, 104, and 199. 3. For data from earlier sources, see Kenneth R. Walker, Food Grain, p. 277; Lardy, Agriculture, p. 34; and Audrey Donnithorne, "State Procurement of Agricultural Produce in C h i n a — I I , " pp. 216-17. 4. Direct sales to the nonagricultural population increased from 1.2 million tons in 1978 to 4.25 million tons in 1982. In table 2.1, direct sales appear to have been virtually eliminated during 1963—65 but not during 1958-59, perhaps reflecting inconsistencies in coverage or errors in the reported figures. For 1978-82 see SSB, Statistical Yearbook 1983, pp. 384-85. 5. Comparison of 1955-57 and 1978-80 yields results similar to those reported in the text, with somewhat larger increases in the volume of purchases and therefore smaller decreases in the purchased shares. Figure 2.1 suggests that comparison using five-year periods is more appropriate if changes over the Maoist era are of interest. The shares for 1956 are unusually low, and the shares for 1979 and 1980 seem to initiate a departure from the trend characterizing the Maoist era. 6. These data may not be labeled accurately in the original source. Comparison of the data in table 2.1 with those in Lardy, Agriculture, pp. 34-35 (for 1953-57 and 197778), and Walker, Food Grain, p. 53 (for 1953-57), indicates that the data in the table pertain to "resales to the agricultural population," not to all "resales in rural areas." 7. Walker, Food Grain, pp. 46—47; as already noted, the procurement data in this source differ somewhat from those underlying table 2.1. 8. Liu Zhongyi and Liu Huachuan, " N o n g y e , " p. 142. The 170 counties produced 15.3 percent of China's grain and provided 23.4 percent of the China's commodity grain. Shipments amounted to 8 million tons; the share in the text is based upon the assumption that this figure refers to trade grain. 9. Zhongguo baike nianjian 1981, p. 276; these areas produced 18 percent of China's grain in 1979 and probably include most or all of the 170 counties already mentioned. The purchased shares reported for the commercial grain areas may not be precisely comparable to those in table 2.1. 10. The share purchased by the nonagricultural population increased significantly after 1977, from roughly 1.6 percent in 1976 and 1977 to 3.2 percent in 1980. As a share of total purchases, direct purchases by the nonagricultural population amounted to 8.2 percent in 1980. See SSB, Statistical Yearbook 1983, pp. 16 and 387. 11. SSB, Statistical Yearbook 1983, pp. 389-92 and 394. 12. Foodgrains accounted for 50 percent of gross agricultural output value in

312

2. AGRICULTURE

1979; W o r l d Bank, China, 2:57; and SSB, Statistical

Yearbook

1983, p. 151. C r o p farming

contributed about two-thirds o f gross agricultural output value during 1976-80 (at 1970 prices); S S B , Statistical

Yearbook

1983, p. 151. T h e share o f grain in crop output value

has been 70-80 percent; Liu and Liu, " N o n g y e , " pp. 140-41. The inference in the text is based upon the assumption that the share of grain purchased is roughly the same by value as by weight. 13. This assumes that grain contributed 55-65 percent o f gross agricultural output value and that the share of grain purchased is roughly the same by value as by weight. Concerning the value of foodgrain output in 1957, see World Bank, China, 2:57. 14. The gross output of commune enterprises in 1981 was 32.3 billion yuan (in 1980 constant prices); net domestic purchases by commercial departments from commune enterprises totaled 4.9 billion yuan in 1981 (apparently in current prices). Although not strictly comparable, these figures suggest a purchased share of less than one-fifth. T h e share f o r team and brigade enterprises is undoubtedly smaller. See SSB, Yearbook

Statistical

1983, pp. 151, 222, and 395. 15. T h e following observations are not conclusive, because little is known about

the shares o f output transferred among the basic accounting units within individual communes (by means of commune distribution plans). 16. Zhongguo Planning

nongye

in Chinese Agriculture,

1980, pp. 4 - 6 ; see also Kenneth R. Walker,

nianjian

pp. 14-16.

17. In 1976 nearly 25 percent of all state purchases of agricultural products other than quota grain were made from the private sector; Beijing radio, 20 December 1976, as cited in Erika Platte, " T h e Private Sector in China's Agriculture," p. 88. 18. Some sales at rural fairs are made to state commercial departments and industrial enterprises, and perhaps to the nonagricultural population. These transactions should be included in the total purchase data, in tables 2.1 and 2.2; the extent to which they are in fact included, however, is not clear. Concerning state activity at rural fairs, see K e v i n Bucknal), "Capitalism and Chinese Agriculture, 1960-66," p. 73. 19. For 1978-80, SSB, Statistical

Yearbook 1983, pp. 16 and 386. For the 1950s,

Ishikawa, " C h i n a ' s Economic G r o w t h , " p. 266. Although the data for the two periods are not strictly comparable, they suggest that as a share of gross output, sales at rural markets did not increase significantly. 20. For grain sales in 1978-80, SSB, Statistical

Yearbook

1983, pp. 384 and 386.

Grain sales on free markets in 1953 amounted to " a s high as 7.1 percent of total o u t p u t " ; Ishikawa. " C h i n a ' s Economic G r o w t h , " p. 263. 21. SSB, Statistical

Yearbook

1983, p. 386; and Y u Zuhua, " S h a n g y e f u w u y e

j i e g o u , " p. 438. Concerning rural fairs, see also Audrey Donnithome, " T h e Organization o f Rural Trade in China Since 1958," pp. 77-91; Lardy, Agriculture,

pp. 31-32, 39, and

43; and Zhan Wu and Liu Wenpu, " A g r i c u l t u r e , " p. 251. 22. The following remarks pertain to changes over time, not to absolute volumes and shares. 23. For 1925-27 (and for 1913), Jerzy F. Karcz, "Thoughts on the Grain Probl e m , " pp. 402 and 408; for 1928-32 and 1954-58, Paul R. Gregory and Robert C. Stuart, Soviet

Economic

Structure

and Performance,

p. 244. Concerning grain marketing in

European Russia during 1878-1910, see Jacob Metzer, "Railroad D e v e l o p m e n t , " pp. 543—45. 24. Robert W . Fogel, Railroads,

p. 76. Fogel's data pertain to shares o f net

2. AGRICULTURE

313

output (in tons) shipped from counties in 1890. The share in the text is a conservative estimate based upon revision of the output figures (to convert them to a gross basis) and adjustment of shipments (to convert to purchases from units smaller than counties). 25. Concerning marketing rates for the 1930s, see Alexander Eckstein, "The Economic Heritage," p. 79; see also. Lardy, Agriculture, p. 33. 26. Concerning the share of grain in GVAO, see section 2.A; concerning grain in the Chinese diet, see Alan Piazza, "Trends in Food and Nutrient Availability in China, 1950-81," p. 17. 27. Little is known about China's grain reserves. Concerning the 1950s, see Audrey Donnithorne, China's Grain, p. 17; Walker, Food Grain, pp. 78-79 and 160; and Lardy, Agriculture, pp. 241—42, n. 3. Concerning the 1970s, see U.S. CIA, National Foreign Assessment Center, "China: Demand for Foreign Grain," p. 4; U.S. Dept. of Agriculture, Economic Research Service, International Economics Division, "China: Review of Agriculture in 1981 and Outlook for 1982," p. 3. Concerning control of reserves and the grain storage system, see Jean C. Oi, "Politics in China's Local Grain Reserve System," pp. 158-77; Ramon H. Myers, "Wheat in China—Past, Present and Future," pp. 326-27; and F. V. Dunkel, "Grain Storage in South China," pp. 409-14. 28. Until 1962 potatoes were weighted at 4:1 (i.e., four kilograms of potatoes counted as one kilogram of grain); since 1963 potatoes have been weighted at 5:1. For purposes of intertemporal comparison, either the 1955-57 or the 1979-81 (and 1978-80) data should be recalculated. In this section the 1979-81 data are recalculated at 4:1 because complete potato output data for the 1950s are not available. See Bruce Stone, "An Analysis of Chinese Data on Root and Tuber Crop Production," pp. 610-11. 29. For further comment concerning boundary changes, see appendix A. 30. Each of the eight provinces mentioned in the text moved at least eleven places in the rank order. The changes between 1955-57 and 1978-80 are similar. 31. Zhu Jingzhi, Woguo de liangshi zhengce he shizhen liangshi gongying gongzuo, pp. 11 and 13; Kenneth R. Walker, "China's Grain Production, 1975-80 and 195257: Some Basic Statistics," pp. 228-29; Wu Yuan-Li, "Food and Agriculture in Mainland China," p. 162 n. 6; K. C. Yeh, "Soviet and Communist Chinese Industrialization Strategies," p. 346; and Donnithorne, China's Grain, p. 14. 32. SSB, Statistical Yearbook 1983, pp. 6 and 177-78. 33. Of course, one could admit minimum supplies that differ among provinces or regions. For elaboration of this point (for the 1950s), see Walker, Food Grain, chapters 3 and 4. 34. The post-Mao reversal suggested by the purchased share data (table 2.1) implies that the use of 1979-81 production patterns may bias the results of this section against the fragmentation hypothesis; dispersion across provinces and required net flows to deficit provinces were probably smaller in the last years of the Maoist era than in 197981.

35. China's grain exports averaged 2.3 million tons per year during 1955-57, and imports averaged less than 0.2 million tons; SSB, Statistical Yearbook 1983, pp. 422 and 438. 36. This paragraph and the next are based upon Walker, Food Grain, pp. 8283. 37. Liaoning's imports are attributable in part to the large share of coarse grains in local output; see Walker, Food Grain, pp. 74-75.

314

2. AGRICULTURE 38. China's grain exports averaged about 1.8 million tons in 1978-79; SSB,

Statistical

Yearbook

1983, p. 422. In this section data for the 1970s include potatoes at

5:1. 39. Output and population data from Walker, Food Grain, pp. 314 and 319. 40. China Trade Report (September 1977), 15:8. National grain output per capita was about 303 kilograms in 1975 and 308 kilograms in 1976; SSB, Statistical

Yearbook

1983, pp. 103 and 158. Output data for Guizhou in 1976 are not available. 41. Both the Yunnan figure and the national average are household survey data, from SSB, Statistical

Yearbook 1984, p. 475.

42. Carolyn L . Whitton, "Rural Development Policies and Progress 1975— 1976," p. 18; and Walker, Food Grain, pp. 314 and 319. See table 8.1. 43. For rice the figure is 200 kilograms; f o r wheat and millet, 150 kilograms. T h e standard varies among provinces, depending upon the composition of local grain consumption. See Eduard Β. Vermeer, " I n c o m e Differentials," p. 17 n. 40; and Zhou Shulian, " W o g u o jingji jiegou de huigu," p. 41. Urban standards may be somewhat higher. 44. Zhou Shulian, " W o g u o jingji j i e g o u , " p. 41. 45. Ma Hong, New

Strategy,

p. 22; World Bank, China,

1:332; and Jiang

Junchen, Zhou Chaoyang, and Shen Jun, " L u n shengchan he shenghuodeguanxi w e n t i , " p. 53. 46. E.g., Guangming

ribao, 3 January 1979, p. 4; and Lardy, Agriculture,

pp.

173-75 and 187-88. 47. O v e r one-half o f the chronically poor counties in China as of 1977-79 were located in five grain-deficient provinces; Lardy, Agriculture,

p. 173. In some provinces

with adequate supplies of grain overall, subsistence rations to poor counties might be provided most easily by inflows across provincial boundaries. 48. Walker, Food Grain, p. 184; and Liu and Liu, " N o n g y e , " p. 143. 49. Output from Walker, Food Grain, p. 39; population from appendix A . 50. Imports increased from 8.8 million tons in 1978 to 12.4 million tons in 1979 and 13.4 million in 1980; exports declined slightly, from 1.9 million tons in 1978 to 1.6 million in 1980. See SSB, Statistical

Yearbook

1983, pp. 422 and 438.

51. Walker, Food Grain, p. 186; and Martin Weil, " E x p o r t O u t l o o k , " p. 7. 52. W e i l , " E x p o r t O u t l o o k , " p. 7; and U . S . C I A , "China: Demand for Foreign G r a i n , " p. 7. In 1979 40 percent of the grain supply in cities was said to be imported, but the cities to which this statement refers were not specified; see Wang Gengjin, "Shehuizhuyi jianshe bixu zunzhong nongye shi jichu de guilu," p. 37. 53. Louis Bernard Schmidt, " T h e Internal Grain T r a d e of the United States 1850-1860," p. 120. 54. F o g e l , Railroads,

pp. 17, 31, and 34.

55. M e t z e r , " R a i l r o a d D e v e l o p m e n t , " p. 544. 56. L a r d y , Agriculture, Past and Present,

p. 37; and Ramon H . M y e r s , The Chinese

cities during 1931-35; M y e r s , The Chinese Economy, flows

p. 179. Concerning internal grain

during the Qing and Republican periods, see Dwight H . Perkins,

Development

Economy

p. 92. China imported o v e r 2 million tons o f grain per year for coastal Agricultural

in China 1368-1968, pp. 142-55.

57. T h e share o f industrial crops in total sown area nationwide declined during the post-Leap famine, to 6.3 percent in 1%2; it then r e c o v e r e d , remaining between 8.4 and 9.2 percent f o r most years during 1964-77. See S S B , Statistical p. 154.

Yearbook

1983,

2. AGRICULTURE

315

58. Purchased shares for cotton are given in SSB, Statistical Yearbook 1983, p. 394. Purchased shares for tobacco and sugar are rough estimates based upon total output (in terms of crop years) and purchases (in terms of calendar years); see SSB, Statistical Yearbook 1983, pp. 160 and 390-91. 59. Potatoes and maize, however, are regarded as inferior; see note 37. 60. See appendix B. In some cases, of course, substitution possibilities do exist; in others, two products of a single crop may have different end uses (e.g., cotton lint and cottonseed). 61. Zhang Po, "Fangzhi gongye jiegou," p. 242. 62. The area sown to the crops in the sample was about 9,300 hectares in 1957 and 8,100 in 1979; for sources, see table 2.9. 63. E.g., Zhongguo kexue yuan, Nongye dili, p. 188 and chapter 5 passim. 64. Zhongguo kexue yuan, Nongye dili, pp. 189, 224, and 228-31; Zhongguo nongye nianjian 1980, pp. 107-12; and Jingji guanli, January 1979, in JPRS 73869, p. 22. Output data appear to be rounded to the nearest 1,000 dan, implying that production is reported if output exceeds 25 tons. 65. Zhongguo kexue yuan, Nongye dili, p. 241. Sun-dried tobacco was widely produced, mainly for local use. 66. Zhongguo kexue yuan, Nongye dili, pp. 211-12 (for peanuts) and pp. 188 and 214 (for rapeseed). 67. Sown area may be viewed as providing a common denominator; an alternative set of location quotients could be calculated using sales data if meaningful sales data were available by crop and province. See Morton D. Winsberg, "Concentration and Specialization in United States Agriculture, 1939-1978," pp. 183-89. 68. For further detail concerning cotton in the 1970s, see Zhongguo kexue yuan, Nongye dili, pp. 189 and 195. 69. The index of dissimilarity, as noted in section 2.B, is the share of output that would have to be redistributed to make the distribution of output among provinces identical to that of population. The data for provinces with high per capita output levels are likely to have been reported in 1957, favoring the approach taken in the table. 70. Supplies are measured in terms of raw materials; hence transfers include transfers of final products in terms of their raw-material equivalents. If a province exports 100 tons of sugar cane and imports 12 tons of sugar, its net outflows are approximately zero, because the extraction rate from cane is about 12 percent. 71. For output of Shanghai, Shanghai shi tongji ju, Shanghai 1983, p. 91. Input requirements are estimated at 1,070 kilograms of cotton per ton of yarn (p. 123, for 1982-83), on the assumption that most of Shanghai's reported yarn output was cotton yarn. For Jiangsu output, table 2.8. 72. Lardy, Agriculture, p. 61. 73. Lardy, Agriculture, p. 63; see also Remin ribao, 30 September 1978, in JPRS 72738, p. 41 (concerning a Hebei prefecture). 74. SSB, Statistical Yearbook 1983, p. 437. 75. SSB, Statistical Yearbook 1981, p. 239, for output of yarn and cloth by province in 1981 ; these data, however, include products of materials other than cotton. See Chen Nai-Ruenn, Chinese Economic Statistics, pp. 199, 200-206, and 253, for output by province and for output and capacity by region in the 1950s; data are not available for every province.

316

2. AGRICULTURE

76. The comments in this paragraph are based upon a comparison of provincial cigarette and tobacco output for 1982. See SSB, Statistical Yearbook 1983, p. 260; and Zhongguo nongye nianjian 1983, p. 47. Raw material requirements are calculated at 59 kilograms of tobacco per case of cigarettes; Shanghai shi tongji ju, Shanghai 1983, p. 123. 77. Tobacco output data, by province, are available for 1979; see table 2.8. Cigarette output data are available for some provinces. For Shanghai, see Shanghai tongji ju, Shanghai 1983, p. 92; for Hebei, Shandong ( 1980) and Guangxi, see Zhongguo jingji nianjian 1981, pp. IV-235, IV-276, and IV-290; for Tianjin, Shanxi, Fujian, Sichuan and Shaanxi, see John L. Scherer, China Facts and Figures Annual, 5:120-127. 78. One recent report claims that cigarettes are not generally distributed interprovincially; Howell Jackson, "Cigarette Prices in China," p. 26. 79. Lardy, Agriculture, p. 73. Fujian's sugar exports were 100,000 tons in 1967 and 180,000 in 1980, but the trend between 1957 and 1979 is not clear; Lardy, Agriculture, p. 68. 80. Lardy, Agriculture, p. 77. 81. SSB, Statistical Yearbook 1983, p. 394. 82. Based upon survey data in SSB, Statistical Yearbook 1984, pp. 465 and 474. 83. For 1979, data for the area sown to vegetables, by province, are available but may exclude private plots, as is true in the case of Shanghai. Private plots have certainly accounted for a substantial share of the total area planted to vegetables. In any case, using sown areas to estimate the distribution of output would require arbitrary assumptions about provincial yields; furthermore, a set of provincial data for vegetable sown area is not available for the 1950s. For the 1979 data, see Zhongguo nongye nianjian 1980, p. 113; concerning Shanghai, see Shanghai shi tongji ju, Shanghai 1983, p. 161. 84. G. William Skinner, "Vegetable Supply," p. 735. 85. Skinner, "Vegetable Supply," pp. 734-35 and 742. 86. NCNA Beijing, 28 December 1974, in FBIS, 31 December 1974, p. E3. 87. For Beijing, NCNA, 28 December 1974, in FBIS, 31 December 1974, p. E4; and Zhongguo jingji nianjian 1981, p. IV-227. Concerning Beijing in 1979, see Renmin ribao, 13 July 1980, p. 2. For Tianjin, Gu Shutang, Tianjin, p. 162. For Shanghai, N C N A , 28 December 1974, p. E4; Zhongguo jingji nianjian 1981, p. IV-255; and Shanghai shi tongji ju, Shanghai 1983, p. 161. Comparisons with the national average are based upon survey data; see note 82. 88. Dagong bao, 10 July 1978, in JPRS 72384, pp. 23-24. 89. Liaoning radio, 30 September 1978, in JPRS 72114, p. 48; Hubei radio, 19 January 1979, in JPRS 72878, p. 39; Hubei radio, 25 September 1979, in JPRS 74551, p. 33; and Anhui radio, 29 December 1978, in JPRS 72738, p. 39. 90. In 1982 Jiangsu (including Shanghai) accounted for over 15 percent of China's output of canned foods, and Zhejiang for over 12 percent. China's exports of canned vegetables increased from 158,000 tons in 1979 to 242,000 tons in 1982. See SSB, Statistical Yearbook 1983, pp. 260 and 424. 91. For output by province, see Zhongguo nongye nianjian 1980, p. 119. Surplus provinces are those with per capita output at least 30 percent above the nationwide level (excluding Jiangsu and possibly Zhejiang, where a high consumption standard is likely). Deficit provinces are those with per capita output more than 30 percent below the nationwide level. Poultry is not included in any of the data discussed in this section.

2. AGRICULTURE

317

92. Heilongjiang radio, 14 December 1979, in JPRS 74971, p. 52. 93. For Beijing, Christopher M. Clarke and Elizabeth Jurkacek, " A Profile of Beijing, Shanghai, and Tianjin," p. 46; for Shanghai, Zhongguo jingji nianjian 1981, p. IV-255. 94. Consumption of pork, beef, and mutton in Tianjin was substantially below average for rural households and slightly below average for urban households; consumption was high in Shanghai and, almost certainly, in Beijing. See Gu, Tianjin, pp. 504 and 507; Shanghai shi tongji ju, Shanghai 1983, pp. 339 and 344; and SSB, Statistical Yearbook 1984, pp. 465 and 474. 95. Liu and Liu, " N o n g y e , " p. 143; and Zhongguo nongye nianjian 1980, pp. 119 and 121. % . SSB, Statistical Yearbook 1983, p. 422; and Jingji daobao, 12 April 1978, in JPRS 71544, pp. 101-2. Meat equivalence is calculated at 57 kilograms per animal. 97. Liu and Liu, " N o n g y e , " p. 143. 98. For 1957 inventories, Walker, Food Grain, p. 289; for meat production in Shanghai (on post-1958 boundaries) during the 1950s. Shanghai shi tongji ju, Shanghai 1983, p. 164. As noted earlier, Shanghai was over 50 percent self-sufficient by 1979. 99. Zhongguo kexue yuan, Nongye dili, pp. 307-8. 100. SSB, Statistical Yearbook 1983, p. 389. 101. Jingji guanti, January 1979, in JPRS 73869, p. 16. 102. For Xinjiang, Beijing radio, 7 October 1978, in JPRS 72150, p. 52; see also Xinjiang radio, 28 March 1979, in JPRS 73320, p. 52. For Neimenggu, Neimenggu radio, 30 October 1978, in JPRS 72421, p. 16; data in this source may not have been adjusted for boundary changes. 103. Jingji guanli, January 1979, in JPRS 73869, p. 16. 104. Gu, Tianjin, pp. 500, 504, and 507. 105. Inventory data from Walker, Food Grain, p. 289; and Zhongguo nongye nianjian 1980, p. 121. Population data from appendix A. Year-end inventories vary considerably from year to year. 106. See tables 2.3 (grain) and 2.9 (cotton). 107. E.g., Liu and Liu, " N o n g y e , " p. 151; Chen Jiyuan, "Diqu jingji jiegou," p. 666; and Lardy, Agriculture, pp. 58-62. 108. Comparisons of area and population densities pertain to cultivated area; see appendix A. Grain data are given in table 2.3. 109. See appendix Β for a definition of "highly agricultural." 110. Shares are based upon data in Zhongguo nongye nianjian 1980, pp. 100 and 130. The share of crop farming in agricultural output is in terms of gross output value. 111. For clarity, the table gives data for the single year 1979; the conclusions concerning comparative advantage are valid for 1980 and 1981 as well. 112. The conclusion concerning tobacco in 1957 is tentative, because the data are incomplete. It is likely that (relative to Guangxi) Yunnan's comparative advantage lay in sugar and Guizhou's in tobacco. 113. The relevant cost in Yunnan is that of sugar in terms of grain, as sugar output increases beyond the actual 1979 level. The relevant cost in Guangxi is that of sugar in terms of grain, as sugar output approaches the actual 1979 level. For clarity, in table 2.13 assumptions on opportunity costs are imposed indirectly via yields rather than directly on the cost ratios. 114. The principal objections to this approach concern the potential inadequacy of the nonland resources that are reallocated and the neglect of interplanting, if any.

318

3. INDUSTRY

115. The assumptions in the table are consistent with a strictly concave production possibilities frontier in each province. Of course, potential output gains exist as long as reallocation does not depress yields so severely as to eliminate differences in opportunity cost across provinces. 116. Zhongguo kexue yuan, Nongye dili, pp. 224 and 227 ; and Zhongguojiaoiong luce, pp. 61-62 and 65-68. Transportation in some parts of the three provinces is difficult, however, due to mountainous terrain. For further discussion of transportation, see chapter 4. 117. Zhongguo kexue yuan, Nongye dili, p. 233; and Zhongguo xinwen, 7 February 1979, in JPRS 73022, p. 4. 118. Teng Weizao, "Socialist Modernization and the Pattern of Foreign T r a d e , " p. 188; see also Chen Jiyuan, "Diqu jingji jiegou," p. 666. 119. E.g., Lei Xilu, " N o n g y e jingji j i e g o u , " pp. 189-90; and Beijing Review, 7 September 1979, p. 7. See also Lardy, Agriculture, pp. 48-81. 120. Of course, the fact that only three crops were considered also constrained the reallocations available. 121. E.g., Lardy, Agriculture, pp. 59-62 and 66-73. 122. The rank order correlation coefficient is - 0 . 3 4 ; the data pertain to grain output per capita in 1979-81 (table 2.3) and share of grain in sown area in 1979 (Zhongguo nongye nianjian 1980, p. 100). 123. E.g., Lardy, Agriculture, pp. 48-81 passim; and Chen Jiyuan. "Diqu jingji j i e g o u , " p. 666. The principal methological issues in such examples concern the determination of comparative advantages. 124. Local self-sufficiency was pursued in products other than grain—conditional upon maintenance of adequate grain output; Zhang Zhuoyuan, "Jianli heli de jingji j i e g o u , " p. 73. See also section 8.B. 125. Conversion of grassland to crop farming during the Maoist era has been widely criticized as a cause of ecological damage. See, for example, Guangming ribao, 31 March 1979, in JPRS 737%, p. 7; Renmin ribao, 23 January 1979, p. 2; and Chen Jiyuan, "Diqu jingji j i e g o u , " pp. 171-172.

3. INDUSTRY 1. For a durable good, provincial consumption is the sum of the net change in stocks of the good held by agents within the province and the number of old units junked within the province during the period in question. 2. Jack Baranson, Automotive Industries, pp. 29 and 24; China has produced mainly 2.5-ton and 4-ton trucks. See also Rhys Owen Jenkins, Dependent Industrialization, p. 268; and Harold Katz, The Decline of Competition in the Automobile Industry, 1920-1940, p. 335. 3. Baranson, Automotive Industries, p. 29. 4. For Chile, Jenkins, Dependent Industrialization, p. 202. For India, Baranson, Automotive Industries, pp. 33 and 94; the estimated production costs for India pertain to 97 percent domestic content. 5. Concerning Tianjin, China Reconstructs, March-April 1952, pp. 28-30; and N C N A Tianjin, 24 September 1951, in S C M P 181, p. 8. Concerning Shanghai, Ji Hua, "Qiche gongye" p. 95; N C N A Shanghai, 19 August 1955, in SCMP 1116, p. 13; N C N A Shanghai, 13 June 1956, in SCMP 1311, p. 23; and N C N A Shanghai, 28 December 1957,

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in SCMP 1682, p. 18. Concerning Changchun, Chen Nai-Ruenn, Chinese Economic Statistics, p. 202; and NCNA Changchun, 13 July 1956, in SCMP 1331, p. 13. 6. R. W. Westgate, "Industrialization Behind the Bamboo Curtain," p. 67; "China's Liberation Model Truck Goes into Production," p. 66; NCNA Changchun, 15 October 1957, in SCMP 1634, p. 1; NCNA Beijing, 17 February 1958, in SCMP 1719, pp. 5 - 6 ; China Reconstructs, March 1965, p. 35; and Ji Hua "Qiche gongye," pp. 9 5 - % . Plans for a second large plant were shelved in 1956 and reconsidered in 1958; Qiche gongcheng, 1981, no. 11, in JPRS 80392, pp. 25-26. 7. NCNA Beijing, 23 June 1958, in SCMP 1801, pp. 29-30; NCNA Beijing, 20 June 1958, in SCMP 1800, p. 18; NCNA Beijing, 14 September 1958, in SCMP 1858, p. 26; Beijing radio, 20 July 1977, in FBIS, 26 July 1977, p. E17; Edgar Snow, The Other Side of the River, p. 211; NCNA Beijing, 15 February 1960, in SCMP 2200, p. 13; and Far Eastern Economic Review, 3 March 1960, p. 445. 8. Jingji daobao, October 1976, in JPRS 68348, pp. 3-4; Ji Xiaofeng. "Qiche gongye," p. 77; I. A. Kapranov, "The Automobile Industry," p. 7; NCNA Nanjing, 17 March 1958, in SCMP 1737, pp. 14-15; NCNA Nanjing, 15 May 1958, in SCMP 1780, p. 53; and NCNA Nanjing, 19 June 1958, in SCMP 1798, pp. 32-33. 9. NCNA Tianjin, 25 June 1958, in SCMP 1803, p. 23; NCNA Beijing, 13 September 1958, in SCMP 1863, p. 14; NCNA Taiyuan, 11 September 1958, in SCMP 1858, p. 29; NCNA Beijing, 2 September 1959, in SCMP2095, pp. 9-10; NCNA Shenyang, 2 April 1958, in SCMP 1750, p. 27; Kapranov, "Automobile Industry," p. 8; Ji Hua, "Qiche gongye," p. 96; NCNA Jinan, 26 August 1958, in SCMP 1844, p. 20; Far Eastern Economic Review, 2 October 1958, p. 424; China Reconstructs, March 1965, pp. 36-37; China Reconstructs, September 1968, pp. 32-33; NCNA Wuhan, 23 June 1958, in SCMP 1801, p. 34; Far Eastern Economic Review, 30 March 1961, p. 591; NCNA Chongqing, 4 April 1958, in SCMP 1750, p. 24; NCNA Chongqing, 15 June 1958, in SCMP 1795, p. 44; NCNA Chongqing, 28 June 1958, in SCMP 1805, p. 16; and David Scott, "Red China's Expanding Automobile Industry," p. 39. 10. NCNA Huhehaote, 12 December 1958, in SCMP 1917, p. 37. 11. Rao Bin et al., Women shi zenyang zhizao qiche de (Beijing: Renmin jiaotong, 1959), in JPRS 42198, p. 11. 12. China Pictorial, 1970, no. 1, p. 11; and China Reconstructs, October 1970, p. 32. 13. NCNA Shanghai, 20 October 1959, in SCMP 2129, p. 27; Far Eastern Economic Review, 21 February 1963, p. 370; Zhongguo xinwen, 13 September 1964, in JPRS 28364, p. 82; Renmin ribao, 12 May 1965, in SCMP 3473, p. 1; Ji Xiaofeng, "Qiche gongye," p. 76; Renmin ribao, 12 April 1965, in SCMP 3453, pp. 1-2; Shishi shouce; 21 April 1965, in ECMM 473, p. 8; and China Reconstructs, March 1965, p. 36. 14. NCNA Jinan, 6 February 1965, in SCMP 3158, p. 19; Ji Xiaofeng, "Qiche gongye," p. 78; NCNA Jinan, 3 September 1966, in SCMP 3776, p. 32; NCNA Nanjing, 27 February 1962, in SCMP 2690, p. 5; Ji Hua, "Qiche gongye," p. 96; Zhongguo xinwen, 27 February 1965, in JPRS 29594, pp. 10-11; China Reconstructs, October 1966, p. 25; and NCNA Tianjin, 22 February 1966, in JPRS 36202, p. 23. 15. NCNA Beijing, 30 May 1965, as cited in U.S. CIA, "Production of Machinery and Equipment," p. 17. 16. NCNA Beijing, 22 September 1964, in SCMP 3306, p. 16. 17. Qiche gongcheng, 1981, no. 11, in JPRS 80392, pp. 22 and 24-26; and Ji Hua, "Qiche gongye," pp. 95-97. The Sichuan and No. 2 Motor Vehicle projects were

320

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incorporated into the "Third Front" campaign, intended to redistribute industrial capacity toward remote interior areas. 18. NCNA Changchun, 19 July 1971, in SCMP 4946, p. 203, Qiche gongcheng, 1981, no. 11, in JPRS 80392, pp. 22-26; Beijing radio, 11 March 1974, in JPRS 61588, pp. 4-5; Ji Hua, "Qiche gongye," p. 97; Hongqi, 1 November 1974, in ECMM 800, p. 63; Beijing radio, 6 January 1975, in FBIS, 29 January 1975, pp. J1-J2; and Renmin ribao, 24 January 1975, in SCMP 5792, pp. 52-53. 19. Ji Hua, "Qiche gongye," pp. 96-97; Shanghai radio, 4 March 1972, in FBIS, 14 March 1972, p. C2; China Pictorial, 1970, no. 1, pp. 8-9; China Reconstructs, September 1968, p. 35; and NCNA Jinan, 3 September 1966, in SCMP 3776, p. 32. 20. Ji Xiaofeng, "Qiche gongye," p. 75; Hubei radio, 30 April 1970, in Union Research Service, 59 (13):180; NCNA Beijing, 20 May 1970, in SCMP 4667, pp. 16-17; Hubei radio, 5 September 1970, in FBIS, 10 September 1970, p. D5; Hubei radio, 5 December 1971, in FBIS, 9 December 1971, p. D2; Guochan qiche jishu xingneng shouce (Beijing: Renmin jiaotong, 1972), in JPRS 60262, pp. 27-28 and 104-7; and Hubei radio, 7 July 1977, in FBIS, 29 July 1977, p. H6. 21. Peking Review, 30 September 1970, p. 14. 22. Hong Kong Standard, 25 April 1970, p. 1; NCNA Beijing, 18 June 1970, in SCMP 4685, p. 142; Peking Review, 31 July 1970, p. 30; Peking Review, 30 September 1970, p. 14; and China Reconstructs, October 1970, p. 34. 23. China News Analysis (24 July 1970), no. 809, pp. 6-7; and Zhu Yanming, "Zhongguo dalu tielu gonglu jiaotong yunshu zhi yanjiu," p. 160. 24. NCNA Beijing, 10 February 1966, in JPRS 36202, pp. 16-17; and China Reconstructs, July 1968, p. 18. 25. E.g., NCNA Fuzhou, 13 May 1970, in SCMP4661, p. 122-23;NCNA Xining, 7 May 1970, in SCMP 4657, p. 187; NCNA Guangzhou, 13 September 1966, in SCMP 3782, p. 21; and Peking Review, 30 September 1970, pp. 14-15. Cooperation among enterprises is emphasized in Jon Sigurdson, "Rural Industry," pp. 219-22. See also note 39, below. 26. E.g., Jingji daobao, October 1976, in JPRS 68348, p. 3; Beijing radio, 20 July 1977, in FBIS, 26 July 1977, p. E17; Shi Hao, "Dui zhonggong qiche jinkou yu shengchan qingxing zhi fenxi," pp. 72 and 79; and Ying Lei, "Gongfei qiche zhi jinkou yu shengchan," pp. 57-58. 27. NCNA Guangdong, 13 September 1966, in SCMP 3782, p. 21; Peking Review, 30 September 1970, p. 15; China Reconstructs, October 1970, p. 32; and Anhui radio, 5 October 1976, in FBIS, 21 October 1976, p. G14. 28. NCNA Nanchang, 11 May 1968, in SCMP 4179, p. 30; NCNA Nanchang, 9 October 1969, in SCMP 4518, pp. 14-15; NCNA Nanchang, 20 February 1970, in SCMP 4606, pp. 17-18; Hongqi, 31 March 1970. in SCMM 679, pp. 69-76; Peking Review, 30 September 1970, p. 15; Guangming ribao, 21 November 1970, in SCMP 4792, pp. 18185; NCNA Beijing, 18 April 1970, in SCMP4645, pp. 74-75; and Jiangxi radio, 3 January 1977, in FBIS, 12 January 1977, p. G19. 29. China Business Review (March-April, 1984) 11:4. 30. Beijing radio, 27 August 1978, in FBIS, 29 August 1978, pp. E1-E2; Beijing Review, 1 December 1978, p. 19; and Beijing Review, 2 June 1980, pp. 26-27. During 1978-81, output at No. 2 Motor Vehicle increased rapidly, as the plant neared completion. Jinan Motor Vehicle was expanded and modernized with Romanian assistance, increasing capacity to 11,000 units per year; Beijing radio, 14 January 1980, in JPRS 75110, p. 44.

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31. Liu Guoguang and Wang Ruisun, Zhongguo de jingji tizhi gaige, p. 18; Renmin ribao, 31 January 1980, p. 5; China Reconstructs, April 1982, p. 14; China Daily, 16 October 1982, in FB1S, 19 October 1982, p. K21 ; Beijing Review, 11 July 1983, p. 7; Ji H u a , " Q i c h e g o n g y e , " pp. 98 and 101 ; and Zhang Shuguang, "Jingji jiegou bianhua de jingji xiaogtio f e n x i , " p. 748. 32. Harold U. Faulkner, The Decline of Laissez Faire, ¡897-1917, pp. 229-32. 33. U.S. Dept. of Commerce, Bureau of the Census, 1967 Census of Manufactures, vol. 2, part 3, p. 37A-7. 34. U.S. Dept. of Commerce, ¡967 Census, vol. 2, part 3, pp. 37A-7 and 3 7 A 16. For total output, see also U N , 1977 Statistical Yearbook, p. 346. Product mix differs from that in China. 35. Baranson, Automotive ¡ndustries, pp. 46 and 92; and Jenkins, Dependent Industrialization, pp. 146, 149, and 205. Product mixes differ. 36. Jenkins, Dependent Industrialization, pp. 244-45. 37. E.g., Liu and Wang, Tizhi gaige, p. 18; and Renmin ribao, 31 January 1980, p. 5. Chinese statements concerning costs must be interpreted carefully, given the deficiencies of input prices and cost concepts. In this case, the reported outcome is consistent with the experiences of other countries. 38. E.g., Chen Shengchang and Li Yue, "Qiye guimo jiegou," pp. 709 and 717. The significance of "vertical disintegration" is elaborated in Stigler, "Division of L a b o r . " 39. E.g., Rudi Volti, Technology, Politics, and Society in China, pp. 192-93; and Qiu Jingji and Huang Juefei, "Jixie gongye jiegou," p. 328. The Shanghai example of extensive cooperation, noted earlier, may be noteworthy as the exception rather than the rule. 40. Zhongguo jingji nianjian 1982, p. VHI-14. 41. Cheng Chu-Yuan, Machine-Building Industry, p. 299; and Shanghai shehui kexue yuan, Shanghai jingji bianjibu, Shanghai jingji ¡949-1982, p. 986. 42. Zhongguo baike nianjian 1981, p. 298; and Beijing radio, 19 April 1978, in FBIS, 3 May 1978, p. E 15. 43. Beijing radio, 8 November 1980, in FBIS, 12 November 1980, p. L29; and Zhongguo jingji nianjian 1983, p. IV-58. 44. Estimated from inventory data in Zhongguo nongye nianjian 1980, p. 137. 45. Dwight H. Perkins, Rural Small-Scale Industry in the People's Republic of China, p. 124; and Qiu and Huang, "Jixie gongye," p. 320. Tractors were exported in 1980 and 1981, probably in very small quantity in the earlier year. See Beijing radio, 19 February 1981, in FBIS, 19 February 1981, p. L12; Beijing radio, 8 January 1982, in FBIS, 8 January 1982. p. K6; and SSB, Statistical Yearbook 1981, p. 3%. 46. The boundary change during 1979 necessitates such assumptions. The two provinces increased their inventories by almost 5,800 units in 1980 and by about 7,500 units annually (on average) from year-end 1975 to year-end 1978; Zhongguo nongye nianjian 1980, p. 137; and Zhongguo nongye nianjian 1981, p. 59. 47. Tables 3.3 and 3.4, and Zhongguo nongye nianjian 1980, p. 137. 48. E.g., Beijing radio, 18 July 1980, in FBIS, 21 July 1980. p. L I . 49. The claims for 1979-80 are based upon net outflows. Loyang tractors were widely observed by a visiting delegation in 1975; Perkins, Small-Scale Industry, p. 125. In 1970 tractor inventories in Henan and Hebei each included about 10,000 units—less than the annual capacities of the Loyang and Tianjin plants; Zhongguo nongye nianjian ¡980, p. 137.

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50. Beijing radio, 8 November 1980, in FBIS, 12 November 1980, p. L29; and Zhongguo baike nianjian 1981, p. 298. In 1981 every province except Xizang produced walking tractors, and no province accounted for more than 18 percent of total output; SSB, Statistical Yearbook 1981, p. 245. 51. Zhongguo baike nianjian 1980, p. 343; and Beijing radio, 28 November 1979, in FBIS, 5 December 1979, p. LI2. 52. Shandong radio, 7 October 1975, in FBIS, 16 October 1975, p. G7. 53. Renmin ribao, 16 May 1979, in JPRS 73869, pp. 30-31. 54. Peking Review, 24 February 1978, pp. 13-14. See also Peking Review, 20 October 1978, pp. 10-11; Hunan radio, 5 January 1979, in FBIS, 9 January 1979, p. H2; and Shehuikexue zhanxian, December 1978, in JPRS 73691, p. 25. 55. Beijing radio, 15 May 1979, in FBIS, 17 May 1979, pp. L14-L15; and Beijing radio, 26 November 1979, in FBIS, 3 December 1979, pp. L8-L9. See also Shehui kexue zhanxian, December 1978, in JPRS 73691, p. 25. 56. Perkins, Small-Scale Industry, pp. 127, 131-32, 144-45, and 147; Jan S. Prybyla, "Changes in the Chinese Economy," p. 420; Jan S. Prybyla, "Impressions of the Chinese Economy," p. 29; and World Bank, China, 2:73. 57. For walking tractors, unit production costs in a small plant were 80 percent higher than in a large plant producing the same model; for engines, costs in a small plant were more than three times those in a larger plant; Shehui kexue zhanxian, December 1978, in JPRS 73691, p. 26. As noted earlier Chinese cost data are deficient. For further comment, see Christine Pui Wah Wong, "Rural Industrialization: Lessons," pp. 404 and 418. 58.U.S. Dept. of Commerce, 1967 Census, vol 2, part 3, p. 35A-7. 59. Robert E. Evenson, "Government Policy and Technological Progress in U.S. Agriculture," in Richard Nelson, ed.. Government Support of Technological Progress: A Cross Industry Analysis (New York: Pergamon, 1982), as quoted in Hans P. Binswanger, "Agricultural Mechanization," pp. 30-31. 60. Norton T. Dodge, "The Stalingrad Tractor Plant," p. 165. The Soviet experience reveals the need for government action in lieu of market forces, which forced consolidation in the American case. 61. Dodge, "The Stalingrad Tractor Plant," pp. 166-67. 62. Binswanger, "Agricultural Mechanization," pp. 31-33. 63. In 1970 prices; Zhongguo jingji nianjian 1982, p. VIII-14. 64. The following comments focus upon end users in the machine-building branch. For other branches of industry, see Christine P. W. Wong, "Rural Industrialization: A Locational Analysis," pp. 157-58 and 163; Wong, "Rural Industrialization: Lessons," p. 420; and Hans Heymann, Jr., "Acquisition and Diffusion." p. 6%. 65. Perkins, Small-Scale Industry, p. 285. 66. Perkins, Small-Scale Industry, p. 287. 67. Concerning Jiangxi, NCNA Nanchang, 9 October 1969, in SCMP 4518, pp. 14-15; Hongqi, March 1970, in SCMM 679, pp. 69 and 72-73; and Jiangxi radio, 12 July 1970, in Union Research Service, 60(5):64. Concerning Shenyang, Beijing radio, 11 April 1975, in FBIS, 17 April 1975, p. L5. The more recent report appears in Zhongguo jixie dianzi gongye nianjian 1984, p. 11-18. 68. Concerning No. I Tractor, Peking Review, 22 November 1963, p. 22. Concerning No. 1 Motor Vehicle, NCNA Changchun, 19 July 1971, in SCMP 4946, pp. 2056. Concerning No. 2 Motor Vehicle, Qiche gongcheng, 1981, no. II, in JPRS 80392, p.

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27; Renmin ribao, 12 February 1982, p. 2, in JPRS 81252, pp. 42-43; andZhortgguojingji nianjian 1982, p. V-144. 69. The principal types of metal-cutting tools included lathes, milling machines, drilling and boring machines, grinders, and gear and thread cutters. 70. Zhongguo jixie dianzi gongye nianjian ¡984, pp. 11—16 and 11-17. 71. Concerning the index of dissimilarity, see section 2.B. The rank order correlation coefficient is 0.84. Metal-cutting machine tools accounted for less than 2 percent of machine-building output, by gross value; Zhongguo jixie dianzi gongye nianjian 1984, pp. 11-244 and VI-2. 72. This interpretation assumes that the provincial ratios of machine tool deliveries to machine-building output are similar. The year-to-year changes in machine-building output do not yield usable estimates of machine tool requirements since the existing stock was not fully utilized. Data concerning inventories of machine tools, as noted earlier, are not readily available. The following discussion ignores foreign trade. 73. Chen Jiyuan, "Diqu jingji," p. 655. 74. E.g., NCNA Beijing, 1 February 1960, in SCMP2191, p. 7. 75. Renmin ribao, 10 June 1970, in SCMP 4681, pp. 12-13. 76. Zhongguo nongye nianjian 1980, p. 125. 77. Zhongguo jixie dianzi gongye nianjian 1984, p. 11-234. 78. SSB, Statistical Yearbook 1981, p. 194. See also Zhongguo jingji nianjian 1982, pp. V-I43 to V-146; and Liang Xunxian, "China's Machine Tool Industry," pp. 30-35. 79. Zhongguo jixie dianzi gongye nianjian 1984, p. II—15. 80. Chen Nai-Ruenn, Chinese Economic Statistics, pp. 186-87, 194, and 200; Gu, Tianjin, p. 89; and Shanghai shi tongji ju, Shanghai 1983, p. 102. 81. Xu Bingwen, "Wo dui dangqian taolunjilei he xiaofei guanxi wenti de yidian yijian," p. 167; Qiu and Huang, "Jixie gongye," p. 329; Ma, New Strategy for China's Economy, pp. 55—56; and Lin Zili, Jingji tiaozheng, pp. 88-89. 82. Zhongguo jixie dianzi gongye nianjian 1984, pp. 11-15. For elaboration, see Rosenberg, Perspectives on Technology, p. 18. 83. Iron and steel claimed about one-seventh of China's total investment in industry during 1950-79; Hu Zhaoliang, "Gangtie gongye," p. 302. 84. Conversely, machine building is the largest user of steel; Gao Zize, "Gangtieye," p. 56. 85. The steel industry is usually defined as the set of establishments producing finished steel products and crude steel (slabs and billets) from iron ore or scrap; for example, Robert W. Crandall, The U.S. Steel Industry, p. 5. In subsequent discussion, plants producing iron not intended for refining into steel are also included, where appropriate. For an overview of steelmaking processes, see Clifford S. Russell and William J. Vaughan, Steel Production, pp. 21-32. 86. E.g., Crandall, U.S. Steel Industry,p. ll;and Anthony Cockerill and Aubrey Silberston, The Steel Industry, pp. 79-85. These observations pertain to the 1960s and 1970s. 87. Walter Isard, "Locational Factors," pp. 203-4. 88. Isard, "Locational Factors," pp. 213-15; and Walter Isard and William M. Capron, "The Future Locational Pattern of Iron and Steel Production," p. 118. 89. Isard, "Locational Factors," p. 217; see also Crandall, U.S. Steel Industry, p. 14.

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90. Once built, high-cost plants will be kept in operation because the variable cost advantage at new plants does not justify new construction. 91. Cockerill and Silberston, Steel Industry, pp. 38, 58, 62, and 65. 92. Crandall, U.S. Steel Industry, p. 145. 93. For both Japan and the U.S., Crandall, U.S. Steel Industry, pp. 11-13 and 144. Total capacities were similar, as of 1978. 94. Crandall, U.S. Steel Industry, p. 14; see also Zoltán J. Acs, The Changing Structure of the U.S. Economy, pp. 98-100. 95. Ma Hong, Xiandai zhongguo jingji shidian, p. 171; and section 8.C. 96. U.S. Dept. of Commerce, 1967 Census, vol. 2, part 2, pp. 33A-9 to 33A13. 97. For provincial population data, see table A.3 (in appendix A). 98. A large producer is here defined as a province with annual crude steel output of three million tons or more—that is, with output approaching the capacity of a single integrated complex of minimum efficient scale. 99. Sun Jingzhi, Zhongguo jingji dili gailun, p. 146. 100. In fifteen of the twenty provinces that were not large producers, this ratio exceeds 1.04; SSB, Statistical Yearbook 1981, pp. 241-42 (for 1981). 101. Sun, Jingji dili gailun, pp. 149 and 152; CHEC, Economy, p. 139; and China Daily, 20 September 1984, p. 4. 102. U.S. Dept. of Commerce, 1967 Census, vol. 2, part 2, pp. 33A-6 and 33A7; and U.S. Dept. of Commerce, Historical Statistics, 2:692. 103. For 1979, Hu Zhaoliang, "Gangtie gongye," p. 315; Chen and Li, "Qiye guimo jiegou," p. 705, gives higher shares. For 1980, Zhongguo baike nianjian 1981, p. 263. As in other countries, small plants are especially important in production of wire rods and bars. 104. Chen and Li, "Qiye guimo jiegou," p. 693. 105. Beijing radio, 12 July 1980, in FBIS, 18 July 1980, p. L15; and Beijing radio, 3 November 1980, in FBIS, 12 November 1980, p. L34. See also Hu Zhaoliang, "Gangtie gongye," pp. 315-16; and Zhongguo baike nianjian 1981, p. 262. 106. Beijing radio, 6 May 1980, in FBIS, 16 May 1980, p. P3. 107. For histories of China's steel industry, see Wu Yuan-Li, Steel Industry; Ronald Hsia, Steel in China, and M. Gardner Clark, China's Steel. 108. See also Wu, Steel Industry, pp. 218-20; Clark, China's Steel, pp. 66-67; China Daily, 18 July 1982, in FBIS, 19 July 1982, p. K9; Sun Jingzhi, Jingji dili gailun, pp. 149 and 156; Hu Zhaoliang, "Gangtie gongye," p. 304; and Dagong bao, 2 August 1980, in FBIS, 7 August 1980, p. U5. 109. Here, the South includes Guangdong and Guangxi; the Northwest includes Shaanxi, Gansu/Ningxia, Qinghai, and Xinjiang. 110. The distribution of resources is briefly described in Sun Jingzhi, Jingji dili gailun, pp. 147—48 and 154-55; and Gao Zize, "Gangtieye," pp. 41 and 71-72. See also U.S. CIA, National Foreign Assessment Center, "China: The Steel Industry," p. 4; Alfred H. Usack, Jr., and James D. Egan, "China's Iron and Steel," pp. 266, 270, and 277; Sun Jingzhi, Jingji dili gailun, pp. 158-59; and Gao Zize, "Gangtieye," pp. 42-43 and 47. 111. E.g., Sun Jingzhi, Jingji dili gailun, p. 151. 112. Willy Kraus, Economic Development, p. 92.

3. INDUSTRY

325

113. Hu Zhaoliang, "Gangtie gongye," p. 304; see also Sun Jingzhi, Jingji dili gailun, p. 156. 114. Hu Zhaoliang, "Gangtie gongye," p. 304; see also Clark, China's Steel, pp. 67-70. 115. Usack and Egan, "China's Iron and Steel," p. 274; and Yang Jianbai and Li Xuezeng, "Nong qing zhong jiegou," p. 114. See also Clark, China's Steel, pp. 7177. 116. NCNA, 6 September 1973, in SCMP5456, p. 101; and, for Henan in 1971, Clark, China's Steel, p. 101. 117. Zhongguo nongye nianjian ¡980, p. 125. 118. Hu Zhaoliang, "Gangtie gongye," p. 305. 119. Ding Hua, "Touzi xiaoguo c h a , " p. 26; see also section 8.C. 120. Hu Zhaoliang, "Gangtie gongye," p. 305. 121. The rank order correlation coefficient is 0.68, for 1981; for machine-building output (in terms of gross output value), see SSB, Statistical Yearbook 1981, p. 219. 122. Hu Zhaoliang, "Gangtie gongye," p. 300. Twenty-seven provinces produced significant quantities of iron in 1981; SSB, Statistical Yearbook 1981, p. 242. Twothirds of the medium-sized iron and steel plants " d o not have their own mining a r e a s " ; Hu Zhaoliang. "Gangtie gongye," p. 315. 123. Sun Jingzhi, Jingji dili gailun, p. 148; Usack and Egan, "China's Iron and Steel," p. 270. 124. Sun Jingzhi, Jingji dili gailun, pp. 146—47; and Chen Jiyuan, "Diqu jingji jiegou," p. 662. 125. For evidence and comment, see Hu Zhaoliang, "Gangtie gongye," pp. 299, 310-12 and 316; Zhang Biwei, "Xiao gangtie," p. II; U.S. CIA, "China: The Steel Industry," p. 4; Usack and Egan, "China's Iron and Steel," p. 281; and Renmin ribao, 2 August 1979, as cited in Wong, "Rural Industrialization: Lessons," p. 401. 126. Further discussion of this point involves consideration of capital-output ratios and gestation periods for Chinese plants of various sizes. In general, existence of small scattered deposits of coal or ore does not necessarily justify construction of small scattered plants. 127. For Liaoning, Chen Jiyuan, "Diqu jingji jiegou," p. 655; and Gongren ribao, 24 September 1964, in JPRS 27802, p. 66. For Beijing, Renmin ribao, 7 September 1971, as cited in Snead, "Self-Reliance," pp. 307-8. For transport data, table 4.6, below; and Gao Zize, "Gangtieye," p. 45. 128. Small plants have not been fully utilized. For examples, see Zhang Biwei, "Xiao gangtie," p. 11; Hu Zhaoliang, "Gangtie gongye," p. 316; and Seiichi Nakajima, "Production Trends in Chinese Industry," p. 4. 129. Zhongguo jingji nianjian 1982, pp. VIII— 13 and VIII—14; and Zhongguo jixie dianzi gongye nianjian 1984, p. 11-244. Data pertain to gross output value for metalcutting machine tools and for the motor vehicle, farm machinery, and ferrous metallurgy industries. 130. Peking Review, 1 December 1978, p. 19. 131. Beijing radio, 27 May 1981, in FBIS, 29 May 1981, p. K.I7; and Ma, New Strategy, p. 123. According to Ma, in Japan specialized plants account for 60 percent in casting and 84 percent in forging. 132. For elaboration, see Stigler, "Division of Labor," pp. 185-93. Underutiliza-

326

3. INDUSTRY

tion is also attributable to " b l i n d " construction of new plants, which caused capacity to outstrip supply capabilities in some industries. 133. Ma, New Strategy, p. 75; Beijing radio, 27 May 1981. in FBIS, 29 May 1981, p. K17; and Zhang Shuguang, "Jingji jiegou bianhua," p. 748. Machine-building output (by gross value) was increasing through 1980. 134. Small, locally operated plants were likely to have older equipment—in some cases, equipment junked by key plants. In the machine tool industry, an analyst at the Economics Institute of the Academy of Science has estimated that 60 percent of the equipment in use is of 1940s and 1950s vintage; William A. Fischer, "Chief Engineer," p. 33. 135. Concerning the tobacco and textile industries, section 2.D. Concerning coal, Robert P. Taylor, Rural Energy, pp. 155-57. Concerning hydropower, Taylor, Rural Energy, pp. 166-67; Kraus, Economic Development, pp. 199, 246, and 261; and Julia Sensenbrenner and Martin Weil, "Debunking the Small Hydro Myth," p. 12. Concerning fertilizers, Chao Kaiig, "The Production and Application of Chemical Fertilizers in China," p. 717; Wong, "Rural Industrialization: A Ideational Analysis," pp. 145-75; and Christine Pui Wah Wong, "Nutrient Supplies in the P R C , " pp. 1-19. Concerning cement, Ian H. MacFarlane, "Understanding and Using Chinese Statistics," p. 630. For provincial output data, SSB, Statistical Yearbook 1981, pp. 239-45; and, for coal only, World Bank, China, 2:248-51. 136. See, e.g., Donnithorne, "China's Cellular Economy"; and Carl Riskin, " C h i n a ' s Rural Industries." See also section 8.C. 137. Coal outflows from Shanxi provide a case in point. 138. As noted at several points in previous sections, the arbitrary and rigid structure of prices in China precludes analytical approaches that rely primarily upon reported values. For an attempt to assess the costs and benefits of small plants in selected industries, see Wong, "Rural Industrialization: Lessons."

4. TRANSPORTATION 1. Thomas G. Rawski, "Chinese Economic Planning," p. 8; and World Bank, China, 2:309-10. 2. This problem is likely in summations of volume across carriers; it should not arise in turnover data. Growth rates (for volumes) will be affected if the extent of doublecounting changes over time. 3. The phrase quoted in the text is from Central Statistical Board of the USSR, The USSR in Figures for 1980, p. 23. 4. SSB, Statistical Yearbook 1981, p. 283. 5. If the share contributed by transport departments in 1956 was actually 29.1 percent of road freight turnover, then the growth rate of road freight turnover is overestimated by one percentage point by assuming constant shares; if the true share in 1956 was 23.4 percent, the error is two percentage points. 6. World Bank, China, 2:370. 7. U.S. CIA, National Foreign Assessment Center, "Handbook of Economic Statistics 1980," pp. 220-22; and Rhoads Murphey, "China's Transport Problem," pp. 19-22. 8. E.g., Herold J. Wiens, " J u n k s , " pp. 263-64; see also section 4.C.

4. TRANSPORTATION

327

9. Concerning the importance of traditional transport, see Wang Derong and GaoZhenfan, "Yunshuye," p. 392; World Bank, China, 2:301 n. 1 ; Ralph W. Huenemann and Nicholas H. Ludlow, "China Railroads," p. 31 ; and Philip W. Vetterling and James J. Wagy, "Transportation," pp. 166-67. 10. The 9.8 percent figure pertains to total turnover (including foreign-trade traffic in Chinese ships), calculated between the end-years 1952 and 1981; see SSB, Statistical Yearbook 1981, p. 13. 11. SSB, Statistical Yearbook 1981, p. 284. 12. Rawski, "Chinese Economic Planning," p. 8; table 4.3 is based upon Rawski's table 3. See also World Bank, China, 2:310. 13. World Bank, China, 2:309. 14. The national income accounts used in these countries are similar to China's. 15. Yangzi data pertain to Yangzi River Navigation Bureau only; Jian Chuan, "Thoroughfare," p. 22. Concerning the Ministry of Communications, Zhongguo jingji nianjian 1981, p. IV-103. These shares are subject to the coverage problem discussed in section 4.A. 16. The share of rail volume in total freight volume did not decrease (nor did the average length of haul increase substantially). For the specific commodities considered, decreases in the rail shares are unlikely, except in the case of petroleum. The rail share declined in the case of petroleum, reflecting a shift to pipelines. In subsequent discussion, "railroad" volumes for petroleum therefore include pipeline volumes. 17. Metal ores are excluded, due to the heterogeneity within this product group and the scarcity of output data for ores other than iron. For iron ore, the production index for 1981 (1956= 1.0) is 6.8, while the transportation index for metal ores is 6.0. For output, Chen Nai-Ruenn, Chinese Economic Statistics, p. 187; and SSB, Statistical Yearbook 1981, p. 236. For transport, table 4.6 and Zhongguo jingji nianjian 1983, p. IV—113. 18. The clear exception is petroleum, 1970 to 1978-79 (discussed in the text, below). The results for iron and steel, 1970 to 1978-79, are ambiguous. 19. U.S. CIA, "China: Demand for Foreign Grain," p. 7. 20. Wolfgang Bartke, Oil in the People's Republic of China, p. 93. 21. As noted earlier, the transportation indexes for 1978-79 (relative to 1970) are higher than the production indexes. This result is of little value, however, since the transportation index is biased upward by the inclusion of products other than oil in the pipeline volume and by possible double-counting in summing across carriers. The evidence needed to correct these deficiencies is not readily available. 22. E.g., Jing Wei, "Shanxi," pp. 25-26; and Zhongguo jingji nianjian 1982, p. V-225. 23. For 1979, Scherer, China Facts and Figures Annual, 5:122. For 1981, SSB, Statistical Yearbook 1981, p. 227; and Zhongguo jingji nianjian 1982, p. V-229. 24. For more recent evidence concerning the Soviet Union, see Holland Hunter and Peggy Dunn. "The Soviet Transport Situation," pp. 28-32. 25. Victor D. Lippit, "Transportation," p. 663; and Jan S. Prybyla, The Chinese Economy, p. 211. 26. E.g. Zhongguo jingji nianjian 1982, p. IV-22; Wang and Gao, "Yunshuye," pp. 390, 395-%, and 403; Lin Senmu, Zhou Shulian, and Qi Mingchen, "Industry and Transport," pp. 336-37; and The Sixth Five-Year Plan of the People's Republic of China for Economic and Social Development (1981-1985), p. 138. 27. This section focuses upon modern domestic freight transportation, excluding

328

4. TRANSPORTATION

air freight. For detail concerning specific transport routes, see Wu, Spatial Economy, 131 and 132; World Bank, China, vol. 2, following p. 466; and Zhongguo

jiaotong

pp. tuce.

28. China Daily, 20 September 1984, p. 4. 29. The corresponding shares f o r other countries during the late 1970s are: India, 20 percent; Japan, 26 percent; and the Soviet Union, 32 percent. See Zhongguo

baike

nianjian 1981, p. 318. 30. For further comment, see Albert S. Peterson, "Transportation," p. 141. 31. Cheng Shih, A Glance at China's Economy, 1981, pp. 274 and 281; and China Daily,

p. 35; SSB, Statistical

Yearbook

17 October 1984, p. 1. For further comment, see

Ralph W . Huenemann and Nicholas H. Ludlow, "China's Railroads," pp. 28-29; Donnithorne, China's Economic

System, pp. 158-59; and Lippit, "Transportation," pp. 669-

70 and 674. 32. Road statistics present problems of definition and coverage. In C M E A reports, the length of highways is defined as the total length of roads suitable for motor traffic, excluding urban streets and those roads belonging to industrial, construction, and agricultural organizations; C M E A , Statistical

Yearbook, pp. 456-57. The data in column

5 o f table 4.1 are probably comparable in coverage to the data reported for C M E A countries, although Chinese sources are not explicit on this point.. 33. SSB, Statistical

Yearbook 1983, p. 299. Data pertaining to the late 1950s are

less reliable than those for other periods, because China's statistical system was disrupted during the Great L e a p (1958-60). 34. Zhongguo

jingji nianjian 1981, pp. 1-24 and IV-101. National trunk highways

probably totaled about 16,000 kilometers in 1958; China News Analysis (8 February 1974), no. 949, p. 1. 35. Peterson, "Transportation," p. 148; see also Ma, Jingji shidian, pp. 264 and 267. 36. Vetterling and W a g y , "Transportation," p. 162; see also Wang and G a o , " Y u n s h u y e , " p. 409; and Holland Hunter, Chinese and Soviet Transport for

Agriculture,

p. 17. 37. Lippit, "Transportation," p. 672 n. 37; and Donnithome, China's

Economic

System, p. 260. It is not clear to what extent village roads unsuitable for motor traffic are included in official statistics; they may account for the rapid growth reported for the late 1950s. 38. Vetterling and W a g y , "Transportation," p. 161. See also Donnithome, China's

Economic

System, p. 260; and David Bonavia, "China's Roadbuilding D r i v e , "

p. 106. 39. World Bank, China. 2:361. 40. World Bank, China, 2:361-62, 366, and 374; Peterson, " T r a n s p o r t a t i o n , " p. 148; and Zhongguo 41. Zhongguo

jingji jingji

nianjian 1981, p. IV-109. nianjian 1981, pp. I V - 2 6 6 a n d 1V-267; " R o u g h R o a d s , " p.

5; and Scherer, China Facts and Figures Annual, 4:277. Data pertain to 1980. 42. Ma, Jingji shidian, pp. 264-65. 43. E.g., World Bank, China,

2:362; Renmin

ribao.

29 June 1984, p. 2; and

George Lauriat and T . Ma, " O n the Road to R e f o r m , " p. 10. 44. C H E C , Economy,

pp. 294-95; Zhongguo

jingji

nianjian

1981, p. 39; and

World Bank, China, 2:380. 45. Zhonghua renmin gongheguo guojia tongji ju, Guanyu 1955 niandu jingji jihua zhixing jieguo

de gongbao,

p. 39; and World Bank, China, 2:380.

guomin

4. TRANSPORTATION

329

46. Ma, Jingji shidian, p. 256. 47. Comparison of 1957 and 1979 based on shipping controlled by Yangzi River Navigation Bureau only. For 1957, Jian, " T h o r o u g h f a r e , " p. 21; and Vetterling and W a g y , "Transportation," p. 169. For 1979, World Bank, China,

2:389-90. See also

Wiens, " J u n k s , " p. 251. 48. Ma, Jingji shidian, p. 257. 49. Peterson, "Transportation," p. 158; World Bank, China, 391; C H E C , Economy,

2:286, 298, and

pp. 294-95; and Ma, Jingji shidian, pp. 251 and 257-58.

50. Ma, Jingji shidian, pp. 259-60; and John M . Pisani, " T h e Big S e v e n , " p. 14. 51. Vetterling and W a g y , "Transportation," p. 149; Ma, Jingji shidian, p. 260; Wang and Gao. " Y u n s h u y e , " p. 396; and Lin, Zhou, and Qi, "Industry and Transport," p. 290. 52. World Bank, China, 2:405; and Zhongguo

jingji

nianjian 1981, pp. IV—111

to IV— 113. 53. Peterson, "Transportation," p. 161 ; and Ma, Jingji shidian, p. 260. In 1979, coastal shipping still accounted for two-thirds of the volume handled by the fifteen ports under central control; World Bank, China, 2:385. 54. Zhongguo

baike nianjian 1981, p. 315. See also Ma, Jingji shidian, pp. 270-

71 ; and Wang and Gao, " Y u n s h u y e , " p. 404. 55. Concerning locomotives and freight cars, see Scherer, China Facts Figures

Annual,

and

1:187; Huenemann and Ludlow, "China's Railroads," pp. 28, 33, 37,

and 40-42; Peterson, "Transportation," pp. 144—46; World Bank, China,

1:133, and

2:342-44, 349, 355, and 391; and Seiichi Nakajima, "Transportation," p. 14. 56. Ma, Jingji shidian, p. 266. 57. Concerning average life, see World Bank, China, 2:368 n. 1. Concerning operational shares, see Wang and Gao, " Y u n s h u y e , " pp. 391 and 394; SSB, 1981, p. 289; and SSB, Statistical

Yearbook

Statistical

Yearbook 1983, p. 314.

58. World Bank, China, 2:238 and 393-94; Peterson, "Transportation," p. 160; and Ma, Jingji shidian, p. 247. 59. For 1949, Jian, " T h o r o u g h f a r e , " p. 21; for 1979, World Bank, China, 1:404. T h e inventory of junks was increasing through 1960; Wang and Gao, " Y u n s h u y e , " p. 393. 60. E.g., Renmin ribao, 9 N o v e m b e r 1977, p. 2; and China Daily, 20 September 1984, p. 4. 61. It is also due in part to differences in coverage among countries. 62. Yan Zhongping, Zhongguo

jindai jingjishi

tongji ziliao xuanji, p. 180; and

table 4.11. 63. Ernest W . Williams. Jr., Freight

Transportation

in the Soviet Union, p. 179;

and table 4.11. In the case of the Soviet Union, the period considered includes World W a r II (for which no adjustment is made). 64. Between 1956 and 1978, India added 6,000 kilometers. In 1956 India had a network of about 55,000 kilometers—larger than China's network in 1981 (by route length). Nearly half o f India's network, however, was composed of meter and narrow gauges. See G o v . of India, Planning Commission, National

Transport Policy,

p. 138. The

three northeastern provinces account for almost one-fourth of China's rail routes and for less than one-tenth of China's area. See SSB, Statistical A . I (in appendix A ) .

Yearbook 1983, p. 300; and table

330

4. TRANSPORTATION

65. For the Soviet Union, Williams, Freight Transportation, pp. 176-77; for the United States, U.S. Dept. of Commerce, Historical Statistics, 2:731; for India, Gov. of India, Ministry of Planning, Statistical Abstract: India 1978, pp. 252 and 254; for China, table 4.12. N o adjustments are made for size or quality. 66. In 1906 the average distance from a farm to a rail stop in the United States was about 11 kilometers in corn territory and about 19 kilometers in the cotton states; Fogel, Railroads, p. 57. In 1906 the land area of the United States was about 7.7 million square kilometers, and first main track totaled 357,800 kilometers; U.S. Dept. of Commerce, Historical Statistics, 1:8 and 2:728. Taking into account inland waterways navigable by 50-ton vessels does not substantially change the inference in the text. 67. The Beijing rail bureau (one of twenty) handled 17 percent of total rail freight turnover in 1981 ;SSB, Statistical Yearbook 1981, pp. 274 and 285. Seven sections, totaling roughly 6,000 kilometers, handle one-half of rail freight turnover; Wang and Gao, "Yuns h u y e , " p. 407. For the commodity composition of Chinese rail freight traffic, see table 4.6. 68. For India, Gov. of India, National Transport Policy, p. 164. For Brazil, U N E C Latin America, 1980 Statistical Yearbook, p. 577; U.S. Agency for International Development, Bureau for Latin America, Summary Economic and Social Indicators, 18 Latin American Countries: 1960-1971, p. 89; and James W. Wilkie and Stephen Haber, Statistical Abstract of Latin America, p. 268. Sources for Brazil are not consistent; the figure in the text is an approximation. 69. For China, table 4.11. For the Soviet Union, Holland Hunter and Deborah A. Kaple, "Transport in Trouble," pp. 226-27; much of the increment is attributable to improvement of older roads. 70. Samuel P. S. Ho, Economic Development of Taiwan, 1860-1970, p. 35; and Zhongguo jingji nianjian 1981, pp. IV-266and IV-267. 71. Zhongguo jingji nianjian 1981, pp. IV—101 and I V - 2 % ; Scherer, China Facts and Figures Annual, 1:185; Vetterlingand Wagy, "Transportation," p. 162; Current Scene (October 1976), 14:20; Heilongjiang radio, 23 February 1977, in FBIS, 7 March 1977, p. L2;and Nakajima, "Transportation," p. 15. In 1979China had 53,348communes and Guizhou alone had 3,732; Zhongguo nongye nianjian 1980, p. 6. 72. " I n Sichuan province alone [as of 1979], for more than 10 million people in 1,100 communes the nearest road is more than 30 km. away (which distance can only be traversed by animal or on foot)"; World Bank. China. 2:357. 73. Fred A. Shannon, The Farmer's Last Frontier: Agriculture, 1860-1897, p. 174. 74. This paragraph is based upon Gov. of India, National Transport Policy, pp. 164-69, 173-74, and 177. "District r o a d s " connect areas of production and markets with one another as well as with other highways and railways. "Classified village roads" connect villages or groups of villages with each other and with the nearest district roads or other highways. "Unclassified village roads" are local dirt roads, apparently not included in reported totals. The Bombay Plan did not cover project and urban roads, which totaled an additional 300,000 kilometers (27 percent surfaced) by 1978. 75. Based upon the assumption that the interrelationship of road density, distances from villages to roads, and share of villages linked with roads is similar in the two countries. 76. For all three provinces, SSB, Statistical Yearbook 1983, p. 300; and table A.l (in appendix A). Chinese reports concerning water routes apparently include those navigable only by small boats for short distances; see table 4.11.

331

5. INTERPROVINCIAL TRADE A N D AID 77. Zhongguo

nongye nianjian 1980, p. 142; and table 4.12.

78. Wu, Spatial Economy,

pp. 17 and 101 ; Holland Hunter, "Transport in Soviet

and Chinese D e v e l o p m e n t , " pp. 74—75; and Williams, Freight

pp. 9 0 -

Transportation,

91 and 94. 79. For elaboration of this point, see section 8.D. 80. E.g., Wang and Gao, " Y u n s h u y e , " p. 387; and Jing, " S h a n x i , " pp. 25-26. 81. E.g., Lin Zili, Jingji tiaozheng,

pp. 116-17; Ma, Jingji shidian, p. 251 ; and

Wang and G a o , " Y u n s h u y e , " p. 410. Available data concerning investment do not reveal conspicuous neglect o f "transportation and communications"; these data, however, are difficult to interpret and are not comparable to those for other countries. Most importantly, Chinese investment data pertain to state investment and therefore exclude most investment in rural areas. For the purposes o f this chapter, changes in actual capacity are more relevant than investment allocations. For data and comment, see SSB, Statistical book 1981, pp. 290-91 and 516; and World Bank, China,

Year-

1:130, and 2:285.

5. INTERPROVINCIAL TRADE A N D AID 1. T h e 1980 figures in 1957 yuan are estimates, obtained by applying the national G V I O deflator to 1980 provincial figures in 1970 yuan. See appendix A and SSB, Yearbook

Statistical

1981, pp. 17-18. 2. This approach in effect ignores trade within agriculture and within industry,

since "agricultural v a l u e , " as determined by the official constant price systems, is treated as a single product regardless of the physical commodity to which it is assigned (and similarly f o r "industrial v a l u e " ) . 3. Calculation o f the 1957 coefficient f o r twenty-four provinces involves application o f national deflators to some of the provincial data (to convert from 1957 to 1952 yuan). U s e o f 1952 prices minimizes the number o f such conversions. 4. For definitions o f "agricultural" and "nonagricultural," see appendix A . 5. In the case o f Yunnan, for example, grain accounted f o r 90.2 percent o f sown area in 1957 and f o r 89.5 percent in 1979; the nationwide shares were 85.0 and 80.3 percent. Yunnan's share in national G V A O fell f r o m 3.0 percent in 1957 (in 1952 prices) to 2.5 percent in 1980 (in 1970 prices). See tables 2.12 and A . 5 . 6. Some probable adverse effects of this alternative could be moderated by encouraging outmigration from lagging provinces; however, outmigration may not be consistent with efficient geographical distribution o f labor (since the marginal product of labor in poor provinces might exceed that in rich provinces). T h e population data in appendix A indicate that outmigration from poor provinces has not generally occurred in socialist China. 7. Assuming that initial levels o f development reflect provincial growth potential. 8. T h e 1957 share in 1952 yuan is similar to the 1957 share in 1957 yuan; both price systems yield the same set of least developed provinces, in terms o f 1957 G V I O per capita. T h e inverse correlation between initial level of development and subsequent growth is discussed in L a r d y , "Central-Provincial Fiscal Relations," pp. 108-10. 9. T h e 1980 per capita output figures (in 1957 prices) are estimates; see note 1, above. 10. The importance o f Shanghai as a net exporter o f investment goods is frequently noted. T h e rapid growth of Jiangsu raises the possibility that net outflows f r o m Shanghai, administratively a separate provincial-level unit, have partly benefited the

332

5. INTERPROVINCIAL TRADE A N D AID

province in which Shanghai is geographically located. A similar possibility exists for Tianjin (in Hebei). 11. Lardy, "Central-Provincial Fiscal Relations," p. 108. For further elaboration, see Lardy, "Centralization and Decentralization in China's Fiscal Management"; Lardy, reply to Audrey Donnithome; Lardy, "Economic Planning and Income Distribution in China"; Lardy, Economic Growth and Distribution in China·, and Lardy. "Regional Growth and Income Distribution in China." 12. E.g., Lardy, "Central-Provincial Fiscal Relations," pp. 102-3 and 110. 13. Calculated using data for twenty-two provinces, including Xizang; Hebei does not include Beijing or Tianjin, and Jiangsu does not include Shanghai. For the revenue-sharing rates, see Lardy, "Central-Provincial Fiscal Relations," p. 103; for GVIO and population by province, see appendix A. For more recent evidence concerning revenue sharing, see Lardy, reply to Audrey Donnithome, p. 351; World Bank, China, 1:349-50; Audrey Donnithome, " N e w Light on Central-Provincial Relations"; and Donnithome, Centre-Provincial Economic Relations in China, pp. 4-14. 14. More generally, different negative rates can be interpreted as favoring the more lightly taxed provinces (or as subsidizing them), depending upon the distribution of centrally financed services across provinces. 15. E.g., Audrey Donnithome, "Comment: Centralization and Decentralization in China's Fiscal Management," pp. 329 and 336-37. See also Donnithome, China's Economic System, pp. 390-93; and Donnithome, The Budget and the Plan in China, pp. 9-10. 16. Lardy, "Central-Provincial Fiscal Relations," pp. 103-4. 17. Determining the magnitude of ν would require budgetary data for centrally operated establishments, by province.

6. THE CONCEPT OF ECONOMIC PLANNING 1. This definition is based upon Paul R. Gregory and Robert C. Stuart, Comparative Economic Systems, p. 12. For elaboration, see John Michael Montias, Structure of Economic Systems, pp. 29-154. The meanings of "mechanism" and "institution" will become clearer in chapter 7. 2. The boundary between system and policy is not entirely clear. The key distinction for many purposes is that between environmental factors and objects of choice rather than that between system and policy. 3. Or, more accurately, the sequence of similar systems since 1957-58. 4. Friedrich A. Hayek, The Road to Serfdom, pp. 34-35. 5. Some agents may themselves be organizations rather than individuals. 6. Of course, in the case of "indirect" planning, agents who exercise their right to refuse direction may incur financial costs as a result. 7. For elaboration, see appendix C. 8. Of course, the leadership might require that a solution program be efficient or might specify an objective function to be maximized. For a given set of conditions handed down by the leadership, a solution need not exist and need not be unique. For elaboration, see G. M. Heal, The Theory of Economic Planning, chapters 1 and 2. 9. For the case of six agents and four commodities, see section 6.C. 10. Since planning is costly, the size of the planned subeconomy might be viewed as an optimization question.

333

7. ECONOMIC PLANNING AND CHINA

11. Each of the Ν tables, one for each unit, corresponds to a square segment (bisected by the main diagonal) of the planned subeconomy's complete m χ m interagent matrix, when the agents are ordered appropriately. The planning agency must take into consideration the cells not included in any such segment. 12. E.g., Dwight H. Perkins, "Industrial Planning and M a n a g e m e n t , " pp. 6023; see also Chenery and Clark, Interindustry

Economics,

pp. 201-31.

13. Concerning iterative routines, see, for example, Martin Weitzman, " I t e r a t i v e Multilevel Planning with Production T a r g e t s . " For further discussion o f planning routines, see also John Michael Montias, "Planning with Material Balances in Soviet-Type E c o n o m i e s " ; Michael Manove, " A Model o f Soviet-Type Economic Planning"; and Heal, Economic

Planning,

Chapters 3 and 7.

14. In other words, the interunit matrix describing planned flows among the Ν units contains /-vectors, where / < n; inflows or outflows o f ñ commodities (ñ

n) appear

in at least one of the Ν divisional plans during the period in question. 15. See section 6.C for elaboration. Of course, even an approximate solution may not be found. The plan may have gaps due to the planning agency's failure to strike simultaneous balances. 16. This description pertains to the allocation of authority within the organization itself; the system is not decentralized in the sense of leaving a large measure of authority with individual agents. 17. When some planning divisions are assigned groups o f agents delineated along regional lines, " d e c e n t r a l i z e d " sometimes refers to planning by the regional divisions; this usage, based upon branches (rather than tiers) in the planning organization, must be distinguished from that suggested in the text.

7. ECONOMIC PLANNING AND CHINA'S ECONOMIC SYSTEM 1. Donnithorne, China's Economic

System, p. 495.

2. Renmin ribao, 2 May 1979, p. 4; and Renmin ribao, 29 M a y 1978, p. 2. 3. Kang Yonghe, director of the State Bureau o f Labor, as quoted in Su W e n ming. Population

and Other Problems,

pp. 64-65. See also Renmin ribao,

29 M a y 1978,

p. 2. 4. Nanfang ribao, 15 May 1962, as quoted in Bruce L . Reynolds, " T w o M o d e l s , " p. 866. 5. Hua Guofeng, " U n i t e and Strive to Build a Modern, Powerful Socialist C o u n t r y ! , " p. 23. 6. E.g., Xue Muqiao, China's Socialist

Economy,

p. 46. This approximation is

also implicit in the comments cited in the previous paragraph. 7. The share of agriculture in net material product was over 40 percent through most of the Maoist era. T h e state sector accounted for less than 4 percent o f gross agricultural output in 1979. T h e share of industry in net material product ranged f r o m 28 percent in 1957 up to 41 percent in 1978. T h e state sector probably accounted f o r about 80 percent of gross industrial output, on average. Nonstate enterprises in other sectors also contributed to net material product. See SSB, Statistical

Yearbook

1981, pp. 20,

105, and 107; Liu and Liu, " N o n g y e , " p. 145; and note 8, below. Yearbook

1981, pp. 106, 108, 208, and 212; labor share

pertains to 1981. For 1973, Peking Review,

8. For 1980, Statistical

16 April 1976, p. 22. Throughout this chapter.

334

7. ECONOMIC PLANNING AND CHINA

gross values are used to calculate shares in total output; deficiencies of Chinese value data were discussed in chapters I and 5. 9. Liu and Liu, " N o n g y e , " p. 145; and SSB, Statistical 10. S S B , Statistical

Yearbook

1981. p. 442.

1983, p. 499; based upon sample surveys.

Yearbook

11. E.g., Marianne Bastid, " L e v e l s of Decision-Making," pp. 173-74. T h e rights to farm private plots and to engage in household subsidiary activities were written into the 1975 Constitution; Peking

Review,

24 January 1975, p. 14.

12. Concerning unreported private businesses, see Lynn T . White I I I , " L o w P o w e r , " pp. 62-63 and 75. Concerning reported individual laborers in urban areas, see S S B , Statistical

Yearbook

1983, p. 137.

13. This estimate is based upon the assumptions that the share o f the private sector in agricultural N M P is similar to the share of the private sector in G V A O and that the share of the private sector in nonagricultural N M P is less than 5 percent. 14. In 1979 there were 5.1 million basic accounting units in collectivized agriculture and 1.48 million enterprises operated by communes and brigades; additional enterprises were operated by rural teams and by urban collectives. Each basic accounting unit in collectivized agriculture is here considered an enterprise. See Zhongguo nianjian

nongye

1980, pp. 6 and 8. 15. For 1979 Liu and Liu, " N o n g y e , " p. 145; the statement concerning earlier

years is based upon the observation that state farms accounted f o r smaller shares of cultivated area and o f grain output in 1964 than in 1979 and the assumption that the private sector typically accounted f o r about one-sixth of G V A O ; see Donnithorne, China's Economic

System,

p. % ; and the discussion o f the private sector, above.

16. Zhou Xiandong, " S h o u g o n g y e , " p. 179; and note 8, above. 17. In 1958, f o r example, " m o r e than 60,000" industrial enterprises were entered in the plan; h o w e v e r , there were 119,000 state-owned industrial enterprises. See Reynolds, " T w o M o d e l s , " p. 860; and SSB, Statistical

Yearbook

1981, p. 207. A s noted in

part 1, 1958 was hardly typical; there were 58,000 state industrial enterprises in 1957 and 53,000 in 1962. Concerning the planning of urban collectives, see, e.g., Zhou Xiandong, " S h o u g o n g y e , " p. 190; Liu and Wang, Tizhi gaige, pp. 13-14; and Xue, China's Economy,

Socialist

p. 227. 18. E.g., X u e , China's 19. Xue, China's

Socialist

Socialist

Economy,

Economy,

p. 62.

p. 108.

20. M a o Zedong, " O n the Ten Major Relationships," as quoted in Christopher H o w e , China's

Economy,

p. 216.

21. Concerning the commercial system, see Donnithorne, China's System,

Economic

chapter 11 ; and section 8 . A . Supply and marketing cooperatives " c o m e under

close State control and are in fact little different from State o r g a n s " ; Donnithorne. China's Economic

System, pp. 278-79. 22. Y . Y . K u e h , " L o c a l L e v e l Planning," pp. 32-33; cited with permission. 23. In some cases of chronic excess demand, rationing was employed to promote

equitable distribution. 24. T h e use o f procurement targets and, to some extent, acreage targets suggests that a two-way partition leaving agriculture " u n p l a n n e d " may overstate the autonomy o f rural collective enterprises. This point is discussed in section 8.B. 25. E.g., Hua, " U n i t e and S t r i v e , " p. 22. 26. In keeping with both Chinese usage and the conventions of chapter 6, the following discussion is cast largely in terms of a partition by agent.

335

7. ECONOMIC PLANNING AND CHINA

27. F o r further detail concerning specific planning offices, see Donnithorne, China's

Economic

System,

passim; W u Yuan-Li, The Economy

pp. 30-46; and Cheng Chu-Yuan, China's 28. E.g., X u e , China's

Economic

Socialist

Economy,

of Communist

Development,

China,

pp. 166-75.

pp. 117 and 209; Ma, New

Strategy,

p. 94; James Stepanek and Dori Jones, " L i K a i x i n , " p. 15; and Liu and Wang, gaige,

Tizhi

p. 8. 29. " L o c a l " (with respect to planning) means county-level and, occasionally,

prefecture-level. 30. Bureaus are typically assigned subunits defined along industry lines; however, some (e.g., railroad and coal bureaus) are assigned geographical subunits. L o c a l planning offices are always assigned geographical subunits. For further discussion, see Kueh " L o c a l L e v e l Planning," pp. 4 - 8 ; and Nicholas H . Ludlow and James B. Stepanek, " H u b e i : Anatomy o f a P r o v i n c e , " pp. 41—43. 31. Kueh, " L o c a l L e v e l Planning," pp. 12-13; and Donnithorne, China's

Eco-

nomic System, pp. 156-57. 32. Concerning the extent of the " c e n t r a l " plan, see Bastid, " L e v e l s of DecisionM a k i n g , " pp. 164-65 and 167. T h e central plan also includes national imports and exports, generally omitted from subsequent discussion. 33. E.g., K u e h , " L o c a l L e v e l Planning," p. 4; and World Bank, China,

1:48.

34. E.g., Reynolds, " T w o M o d e l s , " p. 860. 35. T h e set o f all central enterprises subordinate to a ministry together with those indirectly supervised is called the ministry's " s y s t e m " ; see Donnithorne,

China's

System, p. 21. Concerning the intended functions of ministries as o f 1958, see

Economic

Donnithorne, pp. 154-55. See also Richman, Industrial 36. Liu and Wang, Tizhi gaige,

Society,

p. 680; and section 7.D.

pp. 5 - 7 ; and SSB, Statistical

Yearbook

1981, p.

207. 37. Liu and Wang, Tizhi gaige, 187; and S S B , Statistical

Yearbook

p. 8; China Quarterly

(March 1983), no. 93, p.

1981, p. 207. See also Reynolds, " T w o M o d e l s , " pp.

856-62; and Christine W o n g . " O w n e r s h i p and C o n t r o l , " pp. 12-28. 38. For 1978, Robert Michael Field, "Changes in Chinese Industry Since 1978," p. 746; f o r Hubei in 1980, L u d l o w and Stepanek, " H u b e i , " p. 42. 39. Liu and Wang, Tizhi gaige, 40. SSB, Statistical

Yearbook

pp. 8 - 9 . 1981, p. 207.

41. For 1957, Reynolds. " T w o M o d e l s , " pp. 860-61; and Chao Kang, " P o l i c i e s and Performance in Industry," pp. 562-63. For the 1960s, H o w e , China's 56. F o r Shanghai, Charles Bettelheim, Cultural Revolution

and Industrial

Economy,

p.

Organization

in China, p. 46. These are shares in total output, not in output originating only in planned enterprises. 42. In 1980 1,400 large enterprises contributed 25 percent of industrial output, by gross value; S S B , Statistical

Yearbook

1981, pp. 208 and 212. 2000/1400 χ 0.25 =

0.35. N o t all central enterprises were large; on the other hand, the total number of enterprises was increasing during the late 1970s. 43. Data pertain to metal-cutting machine tools; see Zhongguo gongye

nianjian

jixie

dianzi

1984, p. 11-234 and 11-244. For machine-building in general, relatively

few enterprises were central (pp. 11-234 to 11-242). 44. Compiling Committee of China Coal Industry Yearbook, China Coal Yearbook,

Industry

1982, p. 25.

45. In the case o f the motor vehicle industry, central enterprises produced 34

336

7. ECONOMIC PLANNING A N D CHINA

percent of total output, by gross value, in 1981; this share, however, is not strictly comparable to that in table 7.1, because the share in the table pertains to finished vehicles only. The output share is given in Zhongguo jixie dianzi gongye nianjian 1984, p. 11-254; see also section 8.C. 46. E.g., Ma, New Strategy, p. 67. 47. For further comment, see section 8.D. 48. Details of the planning process have undergone virtually continuous modification, and, even at agiven time, there have been significant variations among ministries and provinces. 49. E.g., Wu Yuan-Li, "Planning, Management, and Development," pp. 10405; Joan Robinson, Economic Management, pp. 17-21; Roland Berger, "Economic Planning in C h i n a , " pp. 182-88; Thomas H. Pyle, "Chinese Management," pp. 8 and 17; Paul Hare, "Industrial Economic Planning," pp. 194-99; and Barry Naughton, "American Economists' Study T e a m , " pp. 6 - 8 . 50. Donnithorne, China's Economic System, p. 28. 51. E.g., Liu and Wang, Tizhi gaige, p. 5; and Donnithorne, China's Economic System, pp. 461-63. 52. Bastid, "Levels of Decision-Making," p. 169; see also p. 175. For the period from 1965 through 1969, see Liu and Wang, Tizhi gaige, pp. 7-8. 53. E.g., Xue, China's Socialist Economy, p. 206; Hare, "Industrial Economic Planning," p. 1%. 54. Upper-level planners are less likely to acquire reliable information about output than about transfers, since the latter are more easily monitored. 55. Attributed to Chang Chun of Nankai University, in Bruce L. Reynolds, "Material Allocation Conferences," p. 12. See also Donnithorne, China's Economic System, pp. 459, 463, 466-67, and 503. 56. Naughton, "American Economists' Study T e a m , " p. 10. 57. E.g., Kueh, " L o c a l Level Planning," pp. 7 - 8 and 45—46; and Donnithorne, China's Economic System, pp. 466. 58. Mao Zedong, in 1956, as quoted in Howe, China's Economy, p. 217; and Li Fuchun, in 1957, as quoted in Wu, "Planning, Management, and Development," p. 108. 59. Vice Premier Li Xiannian, in 1977, as quoted in Reynolds, " T w o Models," p. 871 n. 72. 60. Cheng Guoping, Shanghai Planning and Statistics Committee, in 1977, as quoted in Reynolds, " T w o Models," p. 871 n. 72. 61. E.g., Naughton, "American Economists' Study T e a m . " p. 33; and Donnithorne, China's Grain, pp. 9-10. 62. E.g., Naughton, "American Economists' Study T e a m , " p. 31. 63. This section maintains the distinction between the formulation and refinement stages, although they actually occur more or less simultaneously and involve overlapping sets of actors. 64. Liu and Wang, Tizhi gaige, p. 4; and Stepanek and Jones, " L i Kaixin," p. 15. The commission level is responsible for commonly used fuels, materials, and machines. 65. Xue, China's Socialist Economy, p. 164. 66. Liu and Wang, Tizhi gaige, p. 4; Stepanek and Jones, " L i Kaixin," pp. 1415; and Wong, "Ownership and Control," p. 8 and table 7 (following p. 40). Ministries may perform a commission-level function for such items with specialized uses, to the

7. ECONOMIC PLANNING AND CHINA

337

extent that they strike interunit balances as well as balances among their own subordinates. 67. Stepanek and Jones, " L i K a i x i n , " p. 15; and Wong, " O w n e r s h i p and Control," p. 8. 68. For further comment, see Donnithome, China's Economic System, pp. 17375 and 477-79; Stepanek and Jones, " L i K a i x i n , " pp. 14-19; and Li Kaixin, " Z h o n g g u o de wuzi g u a n l i , " pp. IV-124 to IV-127. See also Edward Clifford Koziara and Yan ChiouShuang, " P r o d u c e r s ' G o o d s , " pp. 689-702. 69. Xue, China's Socialist Economy, p. 117; this comment pertains to the 1950s. 70. E.g., Audrey Donnithome, " A s p e c t s of Neo-Liuist Economic Policy," p. 30. 71. E.g., Peking Review, 16 April 1976, p. 24. 72. Pyle, " C h i n e s e M a n a g e m e n t , " p. 9. See also Reynolds, "Material Allocation C o n f e r e n c e s , " pp. 3 - 1 4 ; Naughton, "American Economists' Study T e a m , " pp. 9 - 1 0 ; Richman, Industrial Society, pp. 712-17; and Donnithome, China's Economic System, pp. 28 and 175. 73. The commercial system is concerned primarily with transactions involving unplanned agents; for indications that it also plays a role within the planned subeconomy, see D o n n i t h o m e , China's Economic System, pp. 174-75; and Koziara and Yan, " P r o ducers' G o o d s , " p. 692. 74. Ludlow and Stepanek, " H u b e i , " p. 42. 75. Donnithome, China's Economic System, pp. 155 and 448-49. 76. E.g., Hare, "Industrial Economic Planning," pp. 190-93; and Donnithome, China's Economic System, pp. 154-55 and 470. 77. Wong, " O w n e r s h i p and C o n t r o l , " pp. 11-12 and 23. 78. E.g., Hare, "Industrial Economic Planning," p. 197; Wong, " O w n e r s h i p and C o n t r o l , " p. 3; and Liu and Wang, Tizhi gaige, pp. 14-15 and 17. In these varieties of dual control, an enterprise may receive a set of orders that is internally inconsistent; the enterprise might routinely assign higher priority to orders emanating from one or another of its superiors or might apply other rules of thumb to determine a course of action. 79. This purpose of dual control is noted in Deng Xiaoping, "Jiakuai fazhan g o n g y e , " p. V-70. 80. Ma, New Strategy, p. 139. 81. Greg O ' L e a r y and Andrew Watson, " C u r r e n t T r e n d s , " p. 136. 82. Bastid, " L e v e l s of Decision-Making," p. 188; romanization has been changed. 83. E.g., Xue, China's Socialist Economy, p. 222; Yunnan radio, 10 February 1979, in FBIS, 12 February 1979, p. J4; and Pyle, "Chinese M a n a g e m e n t , " p. 13. See also note 78, above. 84. Hu Qiaomu, " A n z h a o jingji guilu b a n s h i , " p. V-38. 85. Dong Fureng, " S o m e Problems Concerning the Chinese E c o n o m y , " pp. 731-32. 86. Zhao Ziyang, China's Economy and Development Principles, p. 52. 87. In keeping with this interpretation, in this section the " c e n t e r " is taken to include the commission level (and any interunit balancing performed by ministries) and the central leadership who hand down guidelines and mandatory conditions to the commissions.

338

7. ECONOMIC PLANNING AND CHINA

88. Ma, New Strategy, p. 124. 89. As in previous sections, foreign trade is not taken explicitly into account. 90. Xue, China's Socialist Economy, p. 206. 91. Kraus, Economic Development, p. 167; romanization has been changed. Mao's observations explicitly link imbalance with loss of central control, a point elaborated in the following subsection. 92. E.g., Xue, China's Socialist Economy, p. 176. 93. Zhang, "Jingji jiegou bianhua," p. 733. This report demonstrates that the imbalances are ex ante, in that inputs are inadequate relative to planned output (which in this case consists of completed construction projects). 94. Liu Suinian, "Economic Planning," p. 33; see also Xue, China's Socialist Economy, p. 176. 95. E.g., Sun Yefang, Jingji guanti, February 1981, in FBIS, 26 March 1981, pp. L 4 - L 9 ; and Basil Ashton, Kenneth Hill, Alan Piazza, and Robert Zeitz, " F a m i n e , " pp. 626 and 632. See also Wu, "Planning, Management, and Development," pp. 108-111; Donnithome, China's Economic System, pp. 492-95; and section I.D. Taut planning at higher levels is in part a reaction to deception. % . For further comment, see Perkins, "Industrial Planning and Management," pp. 624-27. 97. Chen Xikang, "Touru chanchu fenxi yu jingji jiegou yanjiu," pp. 760 and 779. See also Donnithome, China's Economic System, p. 494. 98. Michel Oksenberg, "Economic Policy-Making," p. 185; and Donnithome, " C h i n a ' s Cellular E c o n o m y , " p. 606. See also Li Chengrui, "Shinian neiluan," pp. 2324; and Hiyoshi Egawa, "Chinese Statistics: How Reliable?," pp. 12-15. 99. Oksenberg, "Economic Policy-Making," p. 185; and Nicholas H. Ludlow, " R e a d j u s t m e n t , " p. 4. 100. E.g., Xu Dixin, "Transformation of China's Economy," pp. 11-12. 101. Oksenberg, "Economic Policy-Making," p. 168. 102. Xue, China's Socialist Economy, p. 183. 103. E.g., " O n e reason for their possessiveness . . . was that ministries enjoyed greater power if they had income-producing enterprises under their control" ; Oksenberg, "Economic Policy-Making," pp. 176-77. 104. Kenji Hattori, "Sino-Japanese Coal Cooperation," p. 15. The observations of foreigners in China leave no doubt that infighting and noncooperation have been common. See also Oksenberg, "Economic Decision-Making." p. 176. 105. E.g., Xue, China's Socialist Economy, p. 207. 106. Liu and Wang, Tizhi gaige, p. 9. 107. E.g., Bastid, "Levels of Decision-Making," p. 170; and Renmin ribao editorial, 19 April 1977, as quoted in Peking Review, 29 April 1977, p. 23. 108. Barry Naughton, " T h e Decline of Central Control Over Investment in PostMao China," p. 8. In Naughton's paper "decentralization" means control by planning offices in the noncentral branches of figure 7.1. Some "central" investment is controlled by offices far removed from the commission level. Concerning decentralization of control over investment prior to 1970, see Kraus, Economic Development, pp. 133-34, quoting the deputy chairman of the State Planning Commission (in 1958); and Donnithome, China's Economic System, p. 477 (for 1963-64). 109. The possibility that interprovincial aid fostered import substitution was elaborated in chapter 5. 110. The comments in this section pertain to ministries and provincial authorities; however, they may be equally applicable to provincial bureaus and local planning offices.

7. ECONOMIC PLANNING AND CHINA

339

because key features of the Chinese system are replicated at each tier in the planning hierarchy. 111. "They [provincial and municipal planners] are independent. The people who are directly leading them are the provincial or municipal governments"—Zhang Yanning, director of the Production Coordination Bureau, State Economic Commission, in "Implementing China's Plans: An Interview with Zhang Yanning," p. 48. Concerning the importance of provincial Party committees, see Donnithorne, China's Economic System, pp. 55-56, 256, and 309. 112. For further comment, see chapter 8. 113. Concerning regionalist proclivities, see Dorothy J. Solinger, "Decentralization." 114. Nanfang ribao, 30 August 1956, as quoted in Walker, Food Grain, p. 92; romanization has been changed. 115. Kraus, Economic Development, p. 201; and Ashton et al., " F a m i n e , " p. 624. 116. Donnithorne, "China's Cellular E c o n o m y , " pp. 616—17; romanization has been changed. 117. China Trade Report (June 1977), 15:7. 118. All state enterprises nominally belong to "all the people." The interpretation in the text is similar to that of Bai Tuofang, "Jingji tizhi tiaozheng," pp. 39-41. As noted in section 7.B, some enterprises owned by provinces have actually been controlled primarily by ministries; hence, the levels of ownership and control are not necessarily identical. 119. E.g.. Chen Jiyuan, "Diqu jingji jiegou," p. 679, Jingji yanjiu, 1981, no. 12, as quoted in Solinger, "Decentralization," p. 42; and Xue, China's Socialist Economy, p. 161. 120. Concerning the importance of regular contact among planning offices, see Oksenberg, "Economic Policy-Making," p. 181. 121. Deng, "Jiakuai fazhan gongye," p. V-71. For a similar statement by the chairman of the planning commission, see Yu Qiuli, "Mobilize the Whole Party and the Nation's Working Class and Strive to Build Taching Type Enterprises Throughout the Country," p. 12. These problems were probably even more serious during the Great Leap and Cultural Revolution. 122. E.g., Bastid, "Levels of Decision-Making," p. 182; and Renmin ribao, 31 December 1976. p. 2. Concerning the well-known case of Gao Gang and Rao Shushi in 1955, see, e.g., Richard H. Solomon, Mao's Revolution, pp. 260-61. 123. Sueo Kojima, "China Toughens Readjustment," p. 8. 124. Guan Xiaorong, "Zonghe pingheng." pp. 178-83. 125. E.g., Liu and Wang, Tizhigaige, p. 16; China Daily, 9 July 1984, p. 4; Chen and Li. "Qiye guimo jiegou," p. 712; and Dorothy J. Solinger, Chinese Business Under Socialism, pp. 286 and 293. Barriers to trade were sufficiently widespread to warrant the attention of the central leadership in the early 1980s; see Renmin ribao, 21 April 1982, p. 1. 126. Bai, "Jingji tizhi tiaozheng," p. 43. 127. Renmin ribao, 2 May 1979, p. 4; see also Xue, China's Socialist Economy, p. 161 ; and NCNA, 12 November 1980, as quoted in Christine Wong, "Material Allocation and Decentralization," p. 319 n. 53. 128. E.g., Donnithorne, "China's Cellular E c o n o m y , " p. 611 ; and Chen Jiyuan, "Diqu jingji jiegou," p. 677. 129. E.g., Chen Jiyuan, "Diqu jingji jiegou," p. 686.

340

7. ECONOMIC PLANNING AND CHINA

130. For further comment, see Wong, " O w n e r s h i p and Control," pp. 6 - 7 and 35; see also Donnithorne, China's Economic System, p. 478; and Y. Y. Kueh. " E c o n o m i c Reform in China at the Xian L e v e l , " p. 678. 131. Harry Schwartz, The Soviet Economy Since Stalin, p. 92. 132. Gregory and Stuart, Soviet Economic Structure and Performance, p. 120.

8. PLANNING. POLICY, AND ECONOMIC FRAGMENTATION 1. Dorothy J. Solinger, "Politics in Yunnan Province in the Decade of Disorder," p. 647; and Donnithorne, China's Economic System, p. 508. 2. The last point has been widely repeated in connection with the private sector since 1979; e.g., Beijing Review, 10 November 1980, p. 21. 3. Regulation in spheres other than exchange is frequently impossible, because agents are so numerous and because the government has no way to monitor some activities. 4. Concerning the commercial system, see Donnithorne, China's Economic System, chapter 11 ; and Solinger, Chinese Business Under Socialism, pp. 11-123. 5. In particular, work incentives even in planned enterprises may be impaired if the supply of consumer goods (many of which originate in the unplanned subeconomy) is reduced. 6. E.g., White, " L o w P o w e r , " pp. 57-58 and 61; and O ' L e a r y and Watson, " C u r r e n t T r e n d s , " p. 130. 7. The extent to which markets were affected probably varied considerably across regions; no clear overall picture has yet been assembled. For further comment, see section 2.A. 8. E.g., Dagong bao, 3 July 1962, as quoted in Donnithorne, China's Economic System, p. 308; and Yu Zuhua, "Shangye f u w u y e , " p. 451. 9. Renmin ribao, 2 May 1979, p. 4. 10. E.g., Anita Chan and Jonathan Unger, " T h e Second Economy of Rural C h i n a , " p. 18. Of course, some "profiteering" did occur. 11. For comment on this point, see Solinger, "Decentralization," pp. 41—42. See also Lardy, Agriculture, pp. 123-26. 12. For some commodities, however, provincial governments have not had a free hand in pricing. 13. This is especially likely to have occurred in those cases where prices were administered by central authorities. Concerning grain, see Parish and Whyte, Village and Family in Contemporary China, p. 51. 14. E.g., Xue, China's Socialist Economy, pp. 43, 123, and 161; Renmin ribao, 8 September 1979, in JPRS 74747, pp. 13-16; Yu Zuhua, " S h a n g y e f u w u y e , " p. 451, and Renmin ribao, 29 May 1978, p. 2. 15. Hence, agricultural mechanization was " t o be achieved by the provinces . . . mainly through their own efforts"; Li Xiannian, Beijing radio, 27 January 1978, in FBIS, 30 January 1978, p. E4. The double-wheeled double-bladed plow provides an early example of central initiative gone awry as a result of locational factors; see, e.g., Dwight H. Perkins, "Centralization and Decentralization in Mainland China's Agriculture, 19491962," pp. 225-26. 16. Vivienne Shue, " T h e Fate of the C o m m u n e , " p. 262. 17. Susan Mann Jones, "Misunderstanding the Chinese Economy—A Review

341

8. PLANNING, POLICY. FRAGMENTATION A r t i c l e , " p. 550; Jones's comment concerns Myers, The Chinese

Economy:

Past

and

Present. 18. Parish and W h y t e , Village and Family in Contemporary

China, pp. 38, 103,

and 114; these observations pertain to Guangdong. 19. Peking

25 N o v e m b e r 1977, p. 31; and SSB, Statistical

Review,

Yearbook

1981, p. 295. 20. Donnithorne, China's

Economic

System, p. 56.

21. Concerning the commune system and means o f controlling activity in collective agriculture, see Frederick W . Crook, " T h e Commune System in the People's Republic o f China, 1963—74" ; and Francis C. Tuan and Frederick W . Crook, "Planning and Statistical S y s t e m s . " 22. Formulation o f an import-export plan is parceled out to local planners; each local office handles the interface of the plan with those unplanned agents in its locale. 23. According to Xue Muqiao, for example, " m a n y " localities received compulsory production targets f o r nonstaple foods—suggesting that many localities did not. See Xue, China's Socialist

Economy,

p. 110; see also p. 59. Concerning " d i r e c t " planning

for agriculture during the 1970s, see Tuan and Crook, "Planning and Statistical S y s t e m s , " pp. 36-39; Lardy, Agriculture,

pp. 30—48; and, for specific examples, O ' L e a r y and

Watson, "Current T r e n d s , " pp. 138-39. In some cases (although not those examined by O ' L e a r y and Watson), area and output targets may not have been enforced as long as procurement quotas were satisfied; failure to deliver the quantities specified in sales contracts may have triggered tighter " d i r e c t " planning in the subsequent planting season. 24. Lardy, Agriculture, 25. Renmin 156; and Xue, China's

ribao,

pp. 48 and 80.

7 December 1978, as cited in Judy Barfield, " S t a t i s t i c s , " p.

Socialist

Economy,

p. 123.

26. Concerning the famine, see Ashton et al., " F a m i n e . " M a o himself stated in 1961 or 1962 that it was dangerous to rely upon other provinces for f o o d ; Kenneth R. Walker, "Grain Self-Sufficiency in North China, 1953-75," p. 556 n. 8. 27. See Lardy, Agriculture,

pp. 48-86; see also Walker, Food

67, 77, 95, 132, 135, 187, and 199; and Donnithorne, China's

Grain,

pp. 6 6 -

Grain, p. 20.

28. Zhang, "Jianli heli de jingji j i e g o u , " p. 73; and Barfield, "Statistics," p. 159. Concerning Dazhai, see Tsou Tang, Marc Blecher, and Mitch Meisner, " N a t i o n a l Agricultural P o l i c y , " pp. 266-99. 29. E.g., Donnithorne, China's

Economic

System,

pp. 307 and 353; see also

chapter 2. 30. L e i , " N o n g y e jingji j i e g o u , " p. 190; and Zhongguo kexue yuan, Nongye

dili,

pp. 188-89 and 193-94. 31. E.g., Renmin China's Economic

ribao, 9 August 1978, in JPRS 71846, pp. 27-30; Donnithorne,

System, p. 490; and Zhongguo kexue yuan, Nongye

dili, pp. 191, 193,

and 211. 32. Explicitly taking into account the small share o f agricultural output originating in state farms would not affect the validity of this statement. 33. Chen and L i , " Q i y e guimo j i e g o u , " p. 709; and Qiu and Huang, "Jixie gongye j i e g o u , " p. 328. 34. Shanghai shehui kexue yuan, Shanghai jingji 1949-1982, pp. 279-80; Shanghai radio, 1 April 1972, in F B I S , 24 April 1972, p. C5; Barry M . Richman, Society,

p. 481; Guochan

Industrial

qiche jishu xingneng shouce (Beijing: Renmin jiaotong, 1972),

in JPRS 67026, pp. 19-28; and Jack Chen, "Taking O f f on a T r i c y c l e , " p. 27.

342

8. PLANNING, POLICY, FRAGMENTATION

35. Beijing Review, 2 June 1980, p. 26. 36. For example, the Wuhan Iron and Steel Works and Chung Lo Commune (in Guangdong) both produced trucks. See China Business Review (March-April 1979), 6:60; and section 3.A. 37. Zhongguo nongye nianjian 1980, p. 125. 38. Renmin ribao, 13 March 1965, in SCMP 3427, p. 4. 39. Gao Shida, "Gongfei qiche gongye ji qi nianchanliang zhi pinggu," p. 106; China Reconstructs, February 1959, p. 8; and Nan S. Barbour, "China Revamps," p. 57. 40. Liu and Wang, Tizhi gaige, p. 4. 41. Treatment of imports in deriving this share is unclear. For further comment concerning central allocation of motor vehicles, see section 7.B. 42. Ji Hua, "Qiche gongye," p. 98. Concerning ministry guidance of provincial and local enterprises, see section 7.D. 43. Concerning efforts to provide technical assistance and to standardize, see Heymann, "Acquisition and Diffusion," p. 694; Liu and Wang, Tizhi gaige, p. 18; NCNA Changchun, 19 July 1971, in SCMP 4946, pp. 205-6; and Renmin ribao, 23 September 1971, in SCMP 4990, p. 122. It is likely that the motor vehicle bureau orchestrated these campaigns. 44. In other words, if the resources separately deployed by local planners had been concentrated, larger increments to output could have been obtained. For a criticism of "blind development" in the motor vehicle industry (and in others), see Liu Hui, Li Qun, and Qi Mingchen, "Tiaozheng jiben jianshe," p. 417. 45. John G. Gurley, "The Dialectics of Development," p. 132. 46. For further comment, see Wong, "Ownership and Control" pp. 4 - 7 ; and Wang Haibo, "Jilei yu xiaofei de bili guanxi," p. 583. 47. E.g., Liu, Li, and Qi, "Tiaozheng jiben jianshe," p. 425. 48. Chen Jiyuan, "Diqu jingji," p. 662. Most of Guangdong's coal is anthracite. 49. E.g., Peking Review, 27 August 1976, p. 7. In fact, as of the late 1970s, " s o m e 60 percent of north-south [rail] traffic carries coal"; Christopher Clarke, "China's Energy Plan for the 80s," p. 48. Chinese observers have charged that southern China's quest for self-sufficiency has proven extremely expensive and largely unsuccessful, while exploitation of rich coal deposits in the North has been neglected; e.g., Guan, "Zonghe pingheng," p. 183. 50. "Chairman Hua Guofeng's Speech at the National Finance and Trade Conference on Learning from Taching and Tachai," p. 12. 51. Zhongguo jingji nianjian 1981. p. IV-254. For earlier examples, see Donnithome, "China's Cellular Economy," pp. 608-9. 52. Sigurdson, "Rural Industry," pp. 205-6; and Wong, "Rural Industrialization: L e s s o n s , " p. 396. The purely local horizons of county industry were prescribed in the "Seventy Points" of December 1961; Donnithorne, China's Economic System, p. 308. 53. Peking Review, 6 February 1970, pp. 11 and 10. 54. Wong, "Rural Industrialization: Lessons," pp. 397-400. 55. E.g., Jon Sigurdson, "Rural Economic Planning," p. 70. 56. Yu Zuhua, "Shangye f u w u y e , " p. 454. 57. Donnithorne, "China's Cellular Economy," p. 609; romanization has been changed. 58. Stephen Andors, China's Industrial Revolution, p. 158.

8. PLANNING, POLICY, FRAGMENTATION

343

59. Hou Chi-Ming, " C o m m e n t s " (on Christine P. W. Wong, "Rural Industrialization: A Locational Analysis"), p. 175. 60. Renmin ribao, 23 January 1960, as quoted in Donnithorne, China's Economic System, p. 307. 61. Guan, "Zonghe pingheng," p. 185. 62. Chen and Li, "Qiye guimo jiegou," p. 712. 63. Ding, "Touzi xiaoguo c h a , " pp. 25-26. 64. Liu and Wang, Tizhi gaige, p. 18. 65. I.e., local resources, local production, and local distribution. 66. Snead. "Self-Reliance," p. 307. 67. E.g., Peking Review, 6 February 1970,p. 11 ; and Peking Review, l3February 1976, p. 31. 68. Useless products shipped to warehouses increase the gross value of industrial output, a major success indicator: Lin Zili, Jingji liaozheng, p. 89. 69. Peking Review, 12 August 1977, p. 39. In fact, excessive nonagricultural employment has caused problems on several occasions, most notably during the Great Leap: " W e have sowed the grain, the leaves on the sweet potatoes are already withering/ The young people and the strong men have all left to forge steel . . . " ; Peng Dehuai, Minister of Defense, in early 1959, as quoted in Simon Leys, The Chairman's New Clothes, pp. 227-28. 70. The China Automotive Industry Company, for example, was established during the " t r u s t " experiment of the mid-1960s. See Ji Hua, "Qiche gongye," p. 96; and Jingji daobao, October 1976, in JPRS 68348, pp. 2-3. 71. Oksenberg, "Economic Policy-Making," p. 176. 72. E.g., World Bank, China, 2:280; and Prybyla. Chinese Economy, p. 198. 73. The claim concerning traffic density appears in Beijing Review, 27 December 1982. p. 5; and World Bank, China, 2:286. For turnaround times, see SSB, Statistical Yearbook 1981, p. 289; Williams, Freight Transportation, pp. 116-21 and 177; Peterson, "Transportation," p. 147; and Ma, Jingji shidian, p. 253. 74. For provincial freight densities on central and local railroads, see SSB, Statistical Yearbook 1981, pp. 274 and 285. 75. The "vanguard role of railroads" is noted in Zhongguo jingji nianjian ¡981, p. IV-I09. 76. E.g., World Bank. China. 2:358-60 and 371 ; see also Donnithorne, China's Economic System, p. 260. 77. See section 4.C. 78. This shortage is inferred from the volume of nonmotorized traffic observed on China's roads and the large share of short hauls in China's rail traffic. In 1979, 14 percent of rail freight moved less than 50 kilometers and 9 percent moved between 50 and 100 kilometers; Zhongguo jingji nianjian 1981, p. IV-105. In part, however, use of carriers other than trucks may be attributable to overpricing of trucking services; World Bank. China. 2:371. See also note 81, below. 79. For the share of private vehicles, Wang and Gao, " Y u n s h u y e , " p. 389. Concerning for-hire service. Peterson, "Transportation," p. 154. This restriction was recently relaxed; World Bank. China, 2:2%. 80. Wang and Gao, " Y u n s h u y e , " p. 389; SSB, Statistical Yearbook 1981, p. 283: Zhongguo jingji nianjian 1982, p. IV-25; and Peterson, "Transportation," pp. 15354. Private trucks may be smaller than those owned by transport departments. 81. Refusals to accept shipments have been attributed to the "bureaucratic

344

8. PLANNING. POLICY. FRAGMENTATION

w a y s " of transport departments but probably also reflect shortages; e.g., Peterson, " T r a n s p o r t a t i o n , " p. 154. 82. For further comment concerning management of water transport, see Donnithorne, China's Economic System, pp. 262-65; World Bank, China 1:135, and 2:38183, 386-87 and 391; Pisani, " T h e Big Seven," p. 23; and Jian, "Thoroughfare," p. 22. Concerning transshipments, see also China Daily, 25 September 1984, p. 1. Concerning neglect of transport considerations in construction of hydroelectric power plants, see China Daily, 25 July 1984, p. 4. 83. For further comment, see World Bank, China, 2:289, 295, 318, and 331-32. 84. Concerning water transport, see Wang and Gao, " Y u n s h u y e , " p. 388; Ma, Jingji shidian, pp. 251 and 259; and David Lampton, "Water Politics," p. 12. 85. E.g., Martin Weil, "Coal Slurry in China," pp. 21-22; and Lee Collins, "Digging Deep for Reserves," p. 9. 86. As noted in chapter 7, there are exceptions to this generalization, notably in the regional bureaus of some ministries. 87. In fact, fragmentation along intraprovincial boundaries would yield statistical results, at the provincial level, similar to those observed in part 1.

CONCLUSION 1. Kenneth Prewitt, " T h e Prospects for Research in China by American Humanists and Social Scientists," pp. 16-17; Randolph Barker and Beth Rose, "Cornell University Workshop on Agricultural and Rural Development in China T o d a y , " pp. 8 and 50; Fischer, "Chief Engineer," p. 31; Denis Fred Simon, "Rethinking R and D , " p. 29; and Yu Hongjun, Wang Zonglin, and Cheng Hongmo, " K e x u e jishu yu jingji jiegou," p. 615. 2. E.g., Anthony M. Tang and Cliff J. Huang, "Changes in Input-Output Relations in the Agriculture of the Chinese Mainland, 1952-1979," p. 337. 3. E.g., Robert Michael Field, "Slow Growth of Labour Productivity in Chinese Industry, 1952-81," pp. 649 and 651; based upon comparison of 1978 with 1957. 4. E.g., Zhao Ziyang, China's Economy, p. 30. 5. World Bank, World Development Report 1981, pp. viii and 3; and World Development Report 1980, pp. 110-11. The World Bank's estimated growth rate of G N P per capita in China is 2.5-3.0 percent for 1957-79; World Bank, China, 1:10. This estimate, like all others pertaining to G N P in China, is subject to a considerable margin of error. In this paragraph, " p o o r " refers to developing countries with 1979 GNP per capita of $370 or below. 6. Vermeer, "Income Differentials," pp. 1-33; and 1 .ardy, Agriculture, pp. 16585. 7. Potential benefits might include, for example, reduced transport and administrative costs, enhanced local initiative, and more widespread learning-by-doing. 8. "Chairman Hua Guofeng's Speech at the National Finance and Trade Conf e r e n c e , " p. 12. 9. Sun Yefang, "Jiang jingji," p. 5. 10. Guan, "Zonghe pingheng," pp. 179-80. 11. Sun Yefang, "Jiang jingji," p. 2. 12. Bruce L. Reynolds, "Reform in Chinese Industrial Management," p. 123.

345

APPENDIX A 13. E.g.. Zhao Ziyang, China's

Economy,

pp. 23, 28, 32, 41, 52 and 55.

14. Concerning " o b j e c t i v e economic l a w s , " see Hu Qiaomu, " A n z h a o jingji guilu banshi," pp. V-30 to V-43; Xue, China's Socialist Ziyang, China's

Economy,

pp. 311-13; and Zhao

Economy,

p. 19.

15. M a o as quoted in Sun Yefang, "Jiang j i n g j i , " p. 3. " I n the last analysis, productivity of labour is the most important, the principal thing f o r the victory o f the new social s y s t e m " — V . I. Lenin, July 1919, in Robert C. Tucker, The Lenin Anthology,

p.

483.

APPENDIX A: AREA, POPULATION, AND GROSS OUTPUT, BY PROVINCE 1. In January 1954 Suiyuan was absorbed by Neimenggu. In August 1954 Songjiang was absorbed by Heilongjiang, and Liaodong and Liaoxi were combined to form Liaoning. In October 1955 Xikang was absorbed by Sichuan. A t year-end 1955 Rehe was abolished and its territory divided among Hebei, Neimenggu, and Liaoning. See John S. Aird, "Population Estimates," p. 16. 2. Neimenggu is also known as Inner Mongolia, and Xizang as Tibet. 3. For alternative groupings, see Suzanne Paine, "Spatial A s p e c t s , " pp. 191192. 4. Aird, "Population Estimates," p. 14; and Zhongguo

1980. p.

baike nianjian

59. T h e boundaries of Neimenggu before and after the 1979 change are shown in renmin

gongheguo

fensheng

fensheng

dituji (1977). map 6; and Zhonghua

renmin

Zhonghua gongheguo

dituji (1983), map 6. 5. T h e following discussion of these changes is based upon Aird, "Population

Estimates," pp. 1 2 - l 7 ; a n d G u o w u yuan, Zhongguo

disanci renkou pucha (zhuyao

shuzi),

pp. 6 and 53-54. 6. A comparison of the 1964 population of Shandong on mid-1964 boundaries with the 1964 population o f Shandong on 1982 boundaries does not reveal major boundary differences. This suggests that the changes said to have taken place in late 1964 and in 1965 actually occurred earlier or that these changes were later reversed. See Guowu yuan, Zhongguo

disanci renkou pucha, pp. 6 and 53.

7. This paragraph is based upon Morris B. Ullman, " C i t i e s o f Mainland China: 1953 and 1958," pp. 13 and 42-43; Robert Ash, " T h e Quest for Food Self-Sufficiency, " p. 219; Aird, "Population Estimates." p. 7; Guowu yuan, Zhongguo pucha,

disanci

renkou

pp. 6 and 53-54; and Paine, "Spatial A s p e c t s , " p. 194. 8. Concerning the 1953, 1954, and 1957 data, see Aird, "Population Estimates,"

pp. 3 - 5 ; and John S. Aird, " R e c e n t Provincial Population Figures," pp. 2-13. 9. E.g., Walker, Food Grain, p. 254. T h e most conspicuous differences between Walker's figures and those in table A.2 involve Hebei/Beijing/Tianjin. 10. A similar comparison appears in A . John Jowett, "China: The Provincial Distribution o f Population," pp. 109-10. A comparison of the 1964 and 1982 populations, both on 1982 boundaries, is available in Guowu yuan, Zhongguo

disanci renkou

pucha,

pp. 6 - 7 . 11. T h e population data are available in Zhongguo

baike nianjian

1981, p. 69.

There is no single natural measure upon which to base the desired characterization. In the arbitrary scheme used here, an indicator of output mix is paired with an indicator of input allocation.

346

APPENDIX Β

A P P E N D I X Β: C L A S S I F I C A T I O N O F ACTIVITIES IN C H I N E S E A C C O U N T S 1. SSB, Statistical Yearbook 1983, pp. 578-79. 2. SSB, Statistical Yearbook 1983, pp. 582-83. For some goods normally viewed as products of industry, a significant share of total output originates in team and brigade enterprises. 3. E.g., Zhongguo nongye nianjian 1980, pp. 103-13. 4. Li Yue, Gongye bumen, pp. 13-17; see also Chen Nai-Ruenn. Chinese Economic Statistics, p. 28. 5. Li Yue, Gongye bumen, pp. 14-15; see also U.S. CIA, "Production of Machinery and Equipment," pp. 27-31. 6. SSB, Statistical Yearbook 1983, pp. 585-86.

A P P E N D I X C: E F F I C I E N C Y A N D P R O D U C T I V I T Y : D E F I N I T I O N S 1. In general, production possibility does not mean that all of the relevant inputs are available but only that, given the inputs, the production unit could produce the associated outputs. 2. In common usage, x' is "more efficient" than jr. 3. Abram Bergson, Soviet Socialism, pp. 39—45. 4. The term "allocative efficiency" refers to this aspect of productive efficiency external to individual enterprises. The efficiency of a composite unit cannot be studied enterprise by enterprise. This fact is illustrated by the contract curve in an Edgeworth box diagram for producers; see Francis M. Bator, " T h e Simple Analytics of Welfare Maximiation," pp. 23-25. 5. Abram Bergson, The Real National income of Soviet Russia Since 1928, p. 38. 6. Let yT t R" represent the outputs, x71 R" the inputs, t R" the resources available, and c¡ e R" consumption, all in period f.